BITCOIN HACKS AND LOSSES RISKS

Updated: 08/29/2016 14:29
Reprints/Permissions  Hyip Monitor
bitcoin hack loss risks
Estimate the possible risks of bitcoin exchanger account being hacked and your money stolen in comparison to bank accounts system
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Estimate the possible risks of bitcoin exchanger account being hacked and your money stolen in comparison to bank accounts system

Earlier this month hackers entered the secured authentication system at Bitfinex exchange and stole around $70 million worth of the virtual currency. This theft has become the second largest by an exchange since hackers took roughly $350 million in bitcoins at MtGox exchange in early 2014.

One may seem there are no problems and this issue is a solo one. Unfortuantely it's not like that and as Reuters report one third of bitcoin trading platforms have been hacked, half of them closed early after the collapse. This rising risk for bitcoin holders is compounded by the fact there is no depositor's insurance to absorb the loss, even though many exchanges act like virtual banks.

The risk for massive loss leads to the customers with no choice but to do business with undercapitalized exchanges, who are not much wanted by hackers unlike any centralized repository.  

There is definitely some massive security breach problem with Bitcoin exchangers. The system is not safe from being hacked and taking into account lots of millions in Bitcoins can be stored in any of leading platforms attracts hackers, who are in search for large cash. Basically since the start of Bitcoin in 2009 till March 2015 33% of exchangers dealing with Bitcoins were hacked. At the same time out of 6,000 operational U.S. banks, only 67 experienced a publicly disclosed data breach between the same period of time.

Profitability is a big problem for bitcoin exchanges, with many of them unable to generate enough volume to remain working. The price to launch a Bitcoin exchanger is as low as $100,000 up to $1 million. At the same time launching a retail FX trading platform FXCM is required by the Commodity Futures Trading Commission to have at least $25 million in capital at all times.   

Another negative qualifier for the Bitcoin exchanger is bare oportunity to get reimbursed after the loss at any of Bitcoin exchangers. Experts say trading venues acting like banks such as Bitfinex will remain vulnerable. These exchanges act as custodial wallets in which they control users' digital currencies like banks control customer deposits. As for the banks accounts, there is always a third party at the bank that can step in to deal with the theft. The conclusion is simple: due to its irreversible nature bitcoin requires near perfect security.


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