On 20 June 2018, South Korea-based cryptocurrency exchange Bithumb was hacked, resulting in the loss of KRW 35 billion (USD 31 million) of cryptocurrency. This contributed to the gloom across the cryptocurrency markets, even though Bithumb assured its customers that it would cover the losses with its own reserves. In a surprising and unprecedented announcement on 27 June 2018, Bithumb says it has recovered KRW 12 billion (USD 14 million) of the stolen cryptocurrency via collaboration with other cryptocurrency exchanges and companies.
Bitcoin and cryptocurrency transactions are inherently irreversible. Except in the case of a 51% attack, which is only possible for small cryptocurrencies and practically impossible for widely used cryptocurrencies like Bitcoin and Ethereum, once a transaction is confirmed it cannot be reversed. That’s why this news that Bithumb has recovered nearly half of the cryptocurrency stolen in the hack is so unusual.
Bithumb did not reverse any transactions to recover the money. Instead, it traced the flow of the stolen cryptocurrency through the public blockchain ledgers. With this information, it collaborated with other cryptocurrency exchanges and companies, who apparently were convinced by the proof that Bithumb showed, and proceeded to seize funds and give the cryptocurrency back to Bithumb.
This might be the most cryptocurrency recovered in history following an exchange hack. For years, cryptocurrency exchanges and companies have been building up technology to trace cryptocurrency through the blockchain, to determine if funds are stolen or associated with the darknet. If funds are found to be illicit then they are frozen to comply with anti-money laundering standards. These same mechanisms are what saved Bithumb USD 14 million.
Although this is good news for Bithumb and provides hope in the future for other cryptocurrency exchanges, not everyone is going to agree with this sort of centralized action. The spirit of the cryptocurrency community is that of decentralization and anonymity and the fact that cryptocurrency exchanges and companies are performing the extremely centralized action of seizing cryptocurrency would upset many.
Withdrawals from Bithumb continue to be frozen, which undoubtedly is causing much stress among traders who want to access funds. Trading on the exchange continues to be quite active with over USD 100 million per day of trades. Bithumb will restart withdrawals once the investigation is fully completed; so far no timeframe has been given.
Follow BitcoinNews.com on Twitter at https://twitter.com/bitcoinnewscom
Telegram Alerts from BitcoinNews.com at https://t.me/bconews
Image Courtesy: Pixabay