The incessant attacks on cryptocurrency exchanges only helps to grow a bigger target on the backs of others. It proves that centralized exchanges remain vulnerable despite an increased focus on security measures.
Cybercriminals have stolen more than #1.3 billion from digital asset trading platforms worldwide since the beginning of last year and the losses are piling up at an alarming rate.
Who Are the Victims?
Exchange attacks continue to dent the nascent crypto industry and investors’ confidence and towards digital assets. Over $1 billion was stolen from trading platforms in 2018 alone, with the trend only accelerating in 2019.
The most recent Bithumb heist last week rates as the eighth-largest in crypto history. The South Korean exchange suffered a security breach on March 29 which resulted in the loss of about $19 million in EOS and XRP siphoned from the exchange’s hot wallets.
All of these heists just goes to show one of the most critical problems of the industry. The result most of the time is a loss of customer capital and erodes investor confidence, pushing even the thought of mass adoption out of frame.
The Magic Bullet?
The vulnerabilities that are inherent to centralized cryptocurrency exchanges can result in the loss of users’ private keys and control of hot wallets storing huge amounts of digital assets. It’s no wonder these bad actors come back for more what seems like every week as of late.
Dovey Wan, a crypto investor and analyst, commented on the issue of such hacks in a recent post on Twitter. She illustrates the fact that many centralized exchanges create time bombs by holding hundreds of millions of assets in their hot wallets, the community sitting idly by waiting for the next to blow.
The fact that single top exchange being hacked didn’t affect the market means
1) the overall system is much more robust than Mt.gox age (but not sure abt Binance/Coinbase hack)
2) market sentiment is at a bottom as ppl are insensitive to negativity or just indifferent
— Dovey Wan 🦖 (@DoveyWan) March 31, 2019
This track record of attacks suggests the need to build a network of decentralized exchanges (DEXs), like Bancor, OpenLedger Dex, or Waves DEX. Notably, Binance, one of the most popular and largest cryptocurrency exchanges by volume, is also launching its own decentralized platform in the near future. Most crypto enthusiasts are quick to point out that centralization goes against the core idea behind cryptocurrencies, but continue to use them regardless.
Meanwhile, DEXs offer similar functionality but with one fundamental difference. They don’t store clients’ funds and private keys, meaning customers’ funds remains in their possession at all times. This makes it even easier for investors to partake in following the golden rule of crypto, ‘not your keys, not your coins.’
Do you believe that the development of DEXs might help to solve the issue of hacks and credibility? Let us know your thoughts in the comments below!
Images courtesy of Shutterstock, Twitter.