One of the world’s largest cryptocurrency exchanges, Binance, has been breached, with criminal hackers stealing 7,000 bitcoins (about £38 million).
In a statement released on 7 May, the organisation confirmed that it had suffered a “large scale security breach” in a multi-layered attack. The crooks used a variety of techniques, including phishing and malware injection, to obtain users’ API keys and two-factor authentication codes.
They used that information to make a single transaction, transferring the bitcoins from a hot wallet (the bitcoin version of a checking account) into an account they owned. The misappropriated funds comprise about 2% of Binance’s total bitcoin holdings.
How was this possible?
In Binance’s statement, CEO Changpeng Zhao said: “The hackers had the patience to wait, and execute well-orchestrated actions through multiple seemingly independent accounts at the most opportune time.
“The transaction is structured in a way that passed our existing security checks. It was unfortunate that we were not able to block this withdrawal before it was executed.
“Once executed, the withdrawal triggered various alarms in our system. We stopped all withdrawals immediately after that.”
On Sunday, 12 May, Zhao said that Binance has made “significant overhauls” to its system, adding advanced security features and redesigning those that failed to prevent the attack.
He aims for Binance to resume deposits and withdrawals soon.
Can bitcoin still be trusted?
Not long ago, bitcoin was seen as the potential future for financial transactions on the Internet, promising better security, quicker payments and no third-party fees. However, the cryptocurrency market crashed in 2018 amid US regulatory pressure and accusations that the market was artificially inflated.
Bitcoin is slowly regaining its value but is being met with a lot more caution than in the past. This breach certainly won’t have helped, even though Binance has assured that everyone affected by the attack will be reimbursed.
Nonetheless, with vulnerabilities exposed, users may wonder whether the platform can be trusted. Cyber criminals tend to be copycat attackers, and knowing that such an attack is possible may encourage an enterprising crook to replicate the method elsewhere or test the effectiveness of Binance’s new security measures.
As such, we expect the incident to act as a wake-up call for the cryptocurrency industry. If bitcoin is to regain its value, it must demonstrate to its users that its platforms are secure.