$534 million crypto heist won’t be the last

Angus Kidman 29 January 2018 NEWS

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Coincheck is refunding its customers but not everyone will be so lucky.

It was no surprise to learn over the weekend that US$534 million worth of cryptocurrency was stolen from major Japanese exchange Coincheck.

Whenever there are big piles of money, criminals will follow. That was true when robbers used to target bank branches in remote areas and rob them using firearms, and it remains true when the criminal weapon of choice has switched to coding your way round vulnerabilities in a crypto-wallet.

During the attack on Coincheck, some 523 million NEM were transferred to an external account. The estimated value of the stolen cryptocurrency was around 58 billion yen, with 260,000 customers said to be affected.

Coincheck has said that it will refund 46 billion yen of that to customers, so anyone who has been speculating in NEM won't take a total bath. Coincheck also suspended trading in all currencies other than bitcoin following the attack.

The cause of the vulnerability hasn't yet been revealed, though reports have noted that the virtual funds were stored in an Internet-accessible "hot wallet", rather than a potentially more secure "cold" wallet.

The incident serves as a stark reminder that as interest in cryptocurrencies grows, attacks on service providers and currency holders will also grow. Exchanges that don't have significant financial backing and significant technical skills may find the going tough. And even with secure infrastructure, individual traders will remain vulnerable, because they're human and humans do stupid things that weaken security quite often.

Vulnerabilities exist everywhere. As we reported last week, around 10% of funds generated through initial coin offerings typically end up stolen.

Angus Kidman's Findings column looks at new developments and research that help you save money, make wise decisions and enjoy your life more. It appears regularly on finder.com.au.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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