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The importance of choosing wisely – 3 horror stories from hacked exchanges

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The importance of choosing wisely - 3 horror stories from hacked exchanges
Source: Unsplash

Cryptocurrency and blockchain are often celebrated for its security and resistance to hacks. And while it is certainly not undeserved, it is also easy to feel a little uncomfortable with that praise, since cryptocurrency hacks do happen and can be devastating.

One thing that is important to remember, though, is that when these hacks do happen it is almost always never the technology’s fault. Typically, the blame can be put squarely on cryptocurrency exchanges.

Blockchain technology is pretty much failsafe when it comes to resisting theft and fraud, but the exchanges that users rely on to buy, sell, and store their coins can be vulnerable.

There are plenty of cases where users paid a heavy price for choosing an unreliable exchange, and many of them are enough to strike fear into the hearts of any crypto-enthusiast.

Let’s take a look at three of the biggest cryptocurrency hacks, and what went wrong.

Mt. Gox

Back in the long-forgotten time of 2014, Mt. Gox [Magic The Gathering Online Exchange] was the world’s biggest Bitcoin exchange and handled somewhere between 70 and 80 percent of all transactions in the currency.

At this point, the exchange had already suffered one hack, back in 2011, after the exchange was infiltrated, a huge amount of Bitcoins were stolen. Maybe this should have been a warning sign, but the exchange failed to learn its lesson.

In 2014, $473 million worth of Bitcoins were stolen from Mt. Gox — 7% of the world’s total supply.

The immediate results included a massive drop in BTC’s price, a general loss of faith in cryptocurrency security, and bad press for the whole industry. Not to mention the many users that lost out big-time.

So how did it happen? Essentially, Mt. Gox had a few big problems that it failed to address, and these led to the hack.

They didn’t test their code, had no Version Control Software, which is necessary to properly track and manage changes to the code, and overall poor organization.

These vulnerabilities made it possible for hackers to take advantage of something called transaction malleability. Essentially, the hackers were able to make it look like Bitcoins had not been sent to an address when in fact, they had.

Mt. Gox no longer exists, and its founder Mark Karpeles ended up going to prison for separate charges of fraud. The disaster continues to be remembered of an example of how not to run an exchange.

BitGrail

On February 8, 2015, 15 million Railblocks [XRB], the currency of the Nano network, were stolen from the Bitgrail exchange.

The total losses amount to more than $150 million, making it a pretty sizeable hit. As you can probably imagine, the Nano team weren’t happy. In the aftermath, they claimed that Bitgrail had failed to manage its exchange securely by relying on a hot wallet to store its XRB, a method which is much more vulnerable than other methods due to being stored online.

The hack was a stark warning to exchanges to use wallets that are less susceptible to attack, and a warning to users to make sure their exchanges are storing coins in the most secure way possible.

Coincheck

The final hack we’ll cover has been described as ‘the biggest theft in the history of the world’. It is certainly the biggest cryptocurrency hack ever.

523 million NEM coins, worth around $534 million, were stolen from Coincheck exchange on January 26, 2018. The hack, understandably, generated a lot of attention from the start.

So what went wrong? Basically, it was the same issue as with Bitgrail, Coincheck had been keeping its NEM coins in a hot wallet instead of a more secure multi sig wallet like the other coins in their exchange.

Afterwards, Coincheck said they would do their best to reimburse the 260,000 affected members. Since then, over 100 users have filed lawsuits against the exchange, but the markets have actually weathered the shock pretty well and NEM is still around.

Yet again, this hack was a reminder for users to make sure their exchanges are following proper procedure in terms of storing coins

As crypto becomes more widely known and mainstream, hacks like these are bound to continue to happen.

And these kinds of horror stories can be scary, especially for people who have a lot invested in cryptocurrency. Fortunately, nobody is forced to rely on an unsafe exchange, and users can seriously reduce the risk of a hack by taking simple steps.

It is important to look for exchanges that have a solid track record when it comes to security. Find out, if you can, how they store their coins, what kind of security policy they have, and how they’ve responded to crises in the past.

Believe it or not, exchanges like Binance, for example, have never suffered a hack or breach, compared to many that have unreliable security. In fact, this Binance guide discusses the fact that Binance team caught several hackers that were trying to steal funds back in March, confiscated their accounts and donated them all to charity.

By taking the time to do a little research and pick an exchange that puts its user’s security first, you can seriously reduce the worry of your coins being stolen.



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Guest Post

Recruit’s funding division, RSP, announces investment partnership with COTI blockchain enterprise.

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Recruit’s funding division, RSP, announces investment partnership with COTI blockchain enterprise.
Source: Market Across

Recruit, a Japanese-based investment enterprise with a $50 billion market cap, announced that its next major blockchain investment will be in COTI. COTI is a revolutionary, block-less and miner-less blockchain designed to solve many of the scalability issues faced by cryptocurrency. Recruit has established a blockchain specific Blockchain Tech Fund in response to the growing number of opportunities within the blockchain space.

What is Recruit?

Recruit is an international investment leader offering a stake in all stages of business investment opportunities across a variety of tech industries. The company has a particular interest in blockchain, fintech, robotics, AI, and business application services. Companies including BitFlyer, Shift, Udacity, and 99Designs have benefited from strategic investment partnerships with Recruit.

Source: Market Across

Source: Market Across

Recruit created its Blockchain Tech Fund specifically to address the enormous potential of blockchain technology. To support the unprecedented expansion of blockchain-based technological advances, a high level of support from traditional investment partnerships and business models is necessary.

The Recruit Blockchain Tech Fund provides rapid funding of auspicious blockchain technology projects. RSP funding is available throughout all stages of project development, from seed round through growth and expansion.

The Blockchain Tech Fund uses token fundraising to support new business model development in its investment partnerships. This strategy effectively promotes blockchain business expansion as well as mainstream blockchain adoption.

Appeal of COTI

COTI, or Currency of the Internet, offers a unique and promising solution to a global issue using blockchain technology. This issue is scalability.

Regardless of technological advancements, traditional blockchain structures have proven incapable of scaling to meet the needs of a global market. This is particularly true as blockchain expansion continues to move into mainstream business fields.

COTI is based on a Directed Acyclic Graph [DAG] protocol. This structure eliminates both blocks and miners, drastically reducing size and energy expenditure. According to COTI’s website, the platform seeks to provide transaction services at a lower cost than even fiat payments.

Using COTI, organizations can build unique payment solutions. By digitizing a currency of choice, payers and payees can save time and reduce the significant cost of transaction services.

Further bolstering its security capabilities, COTI stores funds in offline, cold wallets, safe from hacking and cyber attack.

COTI and RSP

As COTI and Recruit move toward similar end-goals, promoting and developing the expansion of blockchain technology, both companies recognize the potential for widespread blockchain benefit.

Shahaf Bar-Geffen, COTI CEO, stated,

“We’re pleased to have made it on the radar of the RSP Blockchain Fund and its larger mission of making leading blockchain projects known to the world at large. This is a notable accomplishment for COTI and further anchors our belief in the enormous potential of the technology market in East Asia.”

Source: Market Across

Source: Market Across

Blockchain industry stands to see tremendous benefit from this partnership, as both parties seek to further the expansion and growth of blockchain throughout the traditional business enterprise.

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