Bitfinex hack could shake faith in bitcoin

The day after the hack, Bitfinex restored some of the platform’s function, allowing users to determine their losses. However, key functions, such as trading and withdrawing bitcoins, are still disabled.

This is the latest high-profile hack to affect bitcoin. In April, around $230,000 was stolen from the trading platform ShapeShift, while Hong-Kong based Gatecoin lost more than $2 million of cryptocurrency in May. The biggest ever hack was in 2014, when Tokyo-based exchange Mt. Gox revealed $450 million worth of bitcoin was stolen.

Hacks such as these are likely to scare away new investment in the virtual currency.

“The core fundamental cryptographic strengths behind bitcoin remain strong but naturally events of this nature will spook potential investors,” Charles Hayter, Chief Executive and Founder of cryptocurrency comparison website CryptoCompare, told CNBC via email.

“It’s a reminder of the fragility of the infrastructure in such a nascent industry.”

The hack also illustrates one of the main problems with investing in bitcoin; issues with security.

“Ask someone else to look after your bitcoins (through a virtual wallet) and you’re trusting them like a bank. Banks spend billions on security. Stolen fiat currency leaves a trail that’s hard to cover up. How much can a Bitcoin exchange spend on security?” James Lynn, U.K. managing director of blockchain payment company Billon Group, told CNBC via email.

Lynn warned that we are likely to see more bitcoin hacks, which may further undermine trust in the cryptocurrency.

“The fundamental bitcoin technology remains sound. But hackers target the weakest links – the applications on top of it. MTGox, DAO, Bitfinex. I fear we’re only seeing the start of this trend, which could rock the very foundations of bitcoin value,” he said.

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