As it tries to mitigate the effects of last week’s theft of nearly $68 million, Hong Kong exchange Bitfinex has announced it may make all Bitcoin traders using its service pay the price.
Also read: Bitcoin Price Rebounds as Bitfinex Licks Wounds
‘Socialized Loss Scenario’ for Bitcoin Traders
In a blog post today, the exchange said it was “leaning towards” evenly distributing the loss of 119,756 BTC among its user base – even those whose funds had not been touched. The post reads:
We are still working out the details so nothing is set in stone. However we are leaning towards a socialized loss scenario among bitcoin balances and active loans to BTCUSD positions.
Last week’s hack, which occurred on August 2, sent shockwaves through the Bitcoin community, with prices plunging over 20% before staging a modest comeback over the week.
An investigation into how the incident occurred is still ongoing, while fingers have been variously pointed at Bitfinex, its security partner BitGo and even US legislators. BitGo has released a statement announcing its software “was working correctly.”
The exchange said more information on its contingency plans would be available Saturday, while it is still filling various trades as part of the response outlined following the hack last week.
On Reddit, pundits were quick to react with scorn, asserting traders unaffected by the theft should not have to plug the deficit.
“With this decision to give a haircut to all its users it is committing Hari-Kari,” one user wrote. “Bitfinex is saying: YOU DO NOT OWN BITCOIN PLACED WITH US.”
Best of a Bad Bunch?
Bitfinex Director of Community Product Development Zane Tackett also took to Reddit to provide finer detail on the proposed all-in funds protection move.
“The scenario mentioned would be among those with bitcoin balances and/or active loans to BTCUSD positions,” he said.
User u/Am_I_A_Deer questioned the exact identity of those affected:
“Active loans meaning lenders? Under ur current scenario shorts in btcusd will not take a haircut correct?”
Tackett to this offered a glimpse of what tomorrow’s announcement may contain:
“Yes, lenders, and we will be releasing more details about this tomorrow in our explanations,” he wrote in response.
Despite the added criticism, which may be engendered if such a move goes ahead, there may be few other options. Ideas of cash injections in such instances of foul play in Bitcoin are contrary to the ethos of decentralization, and few parties seem willing to entertain the concept of a bailout-style rescue package reminiscent of fiat crises.
Meanwhile, the Bitcoin ecosystem is proving its increasing overall resilience to setbacks, prices having staged a comeback and enthusiasm weathering the storm in the mainstream press.
What do you think about Bitfinex’s plans and BitGo’s statement? Let us know your thoughts in the comments section below!
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