Bitcoin exchange have been the target of hackers and malicious individuals throughout 2015, and just when we thought things had settled down a bit, a new disaster struck. Popular Bitcoin exchange Bitfinex’s hot wallet has been breached, potentially leading to a loss of customer funds. Let’s review what happened, shall we?
Bitfinex Hot Wallet Breach
Late Friday night, the Bitfinex blog mentioned a potential compromise of the Bitcoin exchange’s hot wallets. Even though Bitfinex stores 99.5% of all funds in multi-signature cold storage, the remaining 0.5% is kept in a hot wallet at all times, making it vulnerable to attack. Taking into account that Bitfinex is the largest Bitcoin exchange in terms of USD trading volume, 0.5% is a significant amount.
As a result of this breach, any “old” deposit addresses associated may have been compromised. Customers have been advised to stop using these old addresses and halt deposits for the time being until Bitfinex resolves the matter and generates new and more secure deposit addresses.
The reason so many Bitcoin enthusiasts are upset regarding this announcement is because Bitfinex has always touted themselves as being one of “the most secure Bitcoin exchanges” to date. That being said, there is no guarantee for being 100% secure at all times due to technology evolving at such a rapid pace.
But there is a positive side to this announcement as well, as it gives Bitcoin’s security experts proof that there is still a long way to go to call a platform “secure”. Multi-signature wallets are a step forward compared to how things were back in 2013 when infamous Bitcoin exchange Mt. Gox shut down, but there is still a lot of room left for improvements.
Note from the Author: Bitfinex has confirmed they will absorb the full amount of funds lost, and reimburse affected customers from their pocket. At this time, it remains unclear as to how much in funds is missing, and how long the refund process will take.
Source: Bitfinex Blog
Images courtesy of Bitfinex