The world's flashiest cryptocurrency exchange has been hacked. Binance, a popular cryptocurrency exchange that has earned poster child status thanks to its hard-charging approach, has been hacked to the tune of around $40 million.
Binance discovered the "large scale security breach" on April 7 and is still reviewing it, CEO Changpeng Zhao wrote in a statement published Tuesday evening. The attackers used "a variety of techniques, including phishing, viruses, and other attacks," to gain access to one of the exchange's internet-connected, or "hot," wallets and withdraw 7,000 bitcoins from it. "All of our other wallets are secure and unharmed," wrote Zhao. He added that deposits and withdrawals would be suspended for a week as his team conducts a security review.
Breaches of cryptocurrency exchanges hacks have become commonplace. Last year, thieves stole $950 million worth of cryptocurrency from exchanges, often by gaining access to hot wallets. So in many ways it's not surprising to hear about another hack. But this is Binance.
Not only is it the most popular exchange in the world by volume, it already has the attention of financial regulators around the world because of its continued embrace of ICO tokens and token sales to retail investors. This is likely to draw even more attention, not only to the exchange itself but to the larger problem of consumer protection in the cryptocurrency industry.
Count me as confused. I have to admit it: I'm still trying to make sense of the latest debate burning up crypto Twitter, which was triggered when Binance CEO Changpeng Zhao (affectionately known as CZ in the crypto community) appeared to consider (and then quickly decide against) asking Bitcoin miners to "roll back" the network's transaction history to recover the funds from the hacker.
Pulling off something like this is possible thanks to the way Bitcoin, Ethereum, and similar blockchain networks work. Specifically, such a chain "reorganization" would take advantage of (or exploit, depending on how you look at it) the process called proof-of-work, which is the energy-intensive competition between miners for chances to add new transactions to the ledger. It is through proof-of-work that the networks reaches a consensus that the ledger is true. But if enough miners can be convinced to get behind an alternate version is the truth, they can work together to modify the ledger.
If this sounds familiar, it may be because you've heard of something similar called a 51% attack. It's also essentially what the Ethereum community did after the infamous DAO hack in 2016, except that time it was called a hard fork. Ethereum's developers have caught a huge amount of flack for the decision to revise the transaction record and recover stolen funds. Critics, including many Bitcoiners, have accused them of compromising the values of blockchain decentralization and "immutability."
That's why I find it so confusing that some Bitcoin fans have argued that a "reorg" might not be so bad in this case. What? What is the difference between this and Ethereum's rescue fork in 2016? The answer may be obvious to blockchain nerds, but to outsiders episodes like this will just make crypto seem even more confusing.
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- MIT economics professor David Autor will talk about how big tech companies can hinder economic growth.
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Loose Change
Fill your pockets with these newsy tidbits.
- FCC Commissioner Jessica Rosenworcel has called on researchers to use AI and blockchains to give the US an edge in 5G. (TR)
- Bitfinex has published an official white paper describing its planned $1 billion "initial exchange offering." (The Block)
- London will be the base of operations for Facebook's WhatsApp payments project. (Financial Times)
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Facebook will no longer require that ads related to "blockchain technology, industry news, education, or events related to cryptocurrency" to receive prior written approval from the company before running. (Facebook)
