Bitfinex Heist Rings the Alarm of Bitcoin Centralization

Nozomi Hayase, PhD, is a writer who has been covering issues of freedom of speech, transparency and decentralized movements.

In this opinion piece, Hayase discusses the recent hack at a major bitcoin exchange and why she believes this should serve as a call to action for those who believe in decentralized solutions and their virtues.

alarm, clock

The problems associated with operating a bitcoin exchange are not going away.

On 2nd August, Bitfinex, one of the largest bitcoin exchanges by volume, became the latest to declare itself the victim of a major security breach. Accounts were hacked and consumer funds stolen. The ghost of Mt Gox stirred again.

Yet despite the issues, exchanges still serve as gateways into bitcoin, the interfaces with the world of central banking. With large exchanges like Coinbase and Bitfinex dominating the trading scene, commercialization has come to the fore of what was once a grassroots movement spurred by anarchists and technologists.

The efficiency and speed that these centralized systems offer trade-offs with security. These fast-growing companies provide convenience to users, while at the same time, funds accumulated in a handful of exchanges tend to concentrate risk and create single points of failure.

The Bitfinex theft

Read more ... source: TheBitcoinNews