Bitcoin experienced a meteoric rise in value in 2017. Bitcoin’s newfound success is attracting a lot of new investors into the cryptocurrency world.
On the other hand, it also attracted a different breed of menace—cyber thieves.
The practice of hacking cryptocurrency exchanges and mining pools was a common news headline for 2017.
And the most recent Bitcoin news scoop is no different: Youbit, a South Korean cryptocurrency exchange, has been hacked twice and is now forced to close their business.
Being a digital currency exchange, Youbit allows users to buy and sell cryptocurrencies such as Bitcoin, Ethereum, and Litecoin, just to name a few. With the latest cyber attack, Youbit lost 17 percent of its assets.
What we don’t know is the exact sum of money that was stolen in the hack. What we do know is Youbit is filing bankruptcy as a result of the incident.
The Korea Internet and Security Agency announced that they had opened an inquiry about the Youbit hack.
The biggest question is what methods the hackers used to access Youbit’s servers.
According to a statement, KISA blamed the Youbit’s first cyber attack on hackers working for North Korea.
Dominating Bitcoin news headlines over the course of 2017 were several similar cyber attacks targeting companies in the Bitcoin industry. Many of those companies also accused North Korea as being the culprit.
As of the moment, KISA is yet to release any specifics in relation to the Youbit hacking incident. According to Youbit’s public statement, customers will receive 75 percent of their money back. Youbit also added that they are very sorry that the company is shutting down.
Fortunately, hackers were not able to steal all of the money deposited in Youbit’s systems.
This is because it is normal for cryptocurrency exchanges to store more than half of the funds in “cold storage,” a form of cryptocurrency storage that is not linked to the internet, making it very difficult for hackers to gain access to the funds.
Youbit is one of the smaller cryptocurrency exchanges in South Korea.
Most of the cryptocurrency trading in the country happens in Bithumb, a cryptocurrency exchange that holds more than half of the market share in the industry.
One of the main purposes of Bitcoin, and cryptocurrencies in general, is to operate money transfers and value storage outside of the traditional banking system.
While such a system does provide protection from bank runs, “frozen” accounts and internal bank manipulation, it also means that a user is excluded from the protection offered by the banks.
This may include fraud protection, reversing transactions and higher levels of security.
This is not to say that Bitcoin and other cryptocurrencies are not secure.
In fact, digital currency is the most secure form of ledger we have on the planet right now.
As of now, blockchain cannot be hacked.
This is a very important distinction to make.
And while Bitcoin itself is robust and secure, the same cannot always be said for cryptocurrency exchanges that hold users’ keys.
If an exchange fails to implement effective security measures, hackers can obtain the user keys and easily steal money from users’ wallets.
This is why it’s imperative that individual users take precautionary steps when storing their funds within cryptocurrency exchanges.
It’s also important that users keep track of the latest Bitcoin news whenever possible, to be informed if the platforms they use are hit with cyber attacks.