Although reports of attacks on crypto exchanges have been making the headlines for a while, some have dismissed the warnings by thinking that such compromises only happen to smaller or lesser-known websites. Yet news this week of a major hack on Binance, one of the world’s most popular crypto exchanges, showed that not even the biggest players in the industry can protect themselves from underlying security flaws.
Through a combination of various methods and use of sensitive data, the hackers were able to take off with 7,000 BTC from a single transaction. In response to the heist, Binance closed all crypto deposits and withdrawals for a week as their team looks into the matter, reports Bitcoinist.
The reaction to the hack, though, by Binance and its CEO, Changpeng Zhao, showcased how the crypto market and its leaders have matured in the past years. Instead of leaving panicked users in the dark, Zhao hosted a live Twitter session where he offered reassurances and answered viewers’ numerous questions. Zhao revealed that the attack only affected the website’s “hot wallet” account, and that no user funds have been compromised. Nonetheless, Zhao persisted with his decision to hold all user assets for a week.
The promise that user funds are secure is made possible through Binance’s SAFU Fund, a type of security that would have been absent even from the largest crypto websites just a few years back. Zhao also said that Binance considered re-organizing the Bitcoin network in order to thwart the attackers’ $40 million bounty and discourage possible new hacks. However, Zhao added that the company ultimately chose to forgo this option for the sake of market stability, writes Blokt. One crypto industry leader, Tron CEO Justin Sun, even offered to donate 7,000 BTC to Binance as an impressive show of support for Bitcoin and the cause of cryptocurrency, notes Yahoo Finance.
While Binance’s response was a marked improvement from similar industry incidents in the past, the hack still did plenty to raise questions about exchanges. At BitIRA, we have been emphasizing the importance of cold storage with cryptocurrencies, whether on a hardware device held by you or one guarded by a dedicated custody service.
Currently, anything other than true offline storage will not offer a satisfactory level of security for one’s coins and tokens. Security measures or not, hackers will likely be able to identify existing protocols on an exchange and find a way around them with enough time and dedication. Although no user funds were lost in the latest hack, there is no guarantee that consumers’ digital wallets will remain secure if another attack were to happen again on a centralized exchange.
Despite assurances from the team behind it, cryptocurrencies stored on any exchange, even one as large as Binance, are far from 100% safe. As our Crypto Security Guide explains, your crypto assets are vulnerable to hacks and compromises up until they are transferred to a dedicated device disconnected from the internet. Only then can you truly rest in knowing that your tokens are secure regardless of what’s happening on the crypto exchanges that you use.
How do you think Binance handled the security breach in terms of preparedness and initial response? Let us know in the comments section below.