How to Secure Bitcoin Exchanges, or Why All Hope Is Not Lost

Last week’s

hack, in which Bitcoin’s leading exchange lost almost 120,000
bitcoins valued some $70 million USD at the time, represented a
depressing realization for the Bitcoin community. Where many had
hoped that multi-million dollar hacks and loss of customers funds
were a thing of the past, it became clear that storing bitcoins on
an exchange is still not as secure as it perhaps should be. In an
industry first, Bitfinex imposed an

Extraordinary Loss Adjustment

on all customer funds; re-opening balances this week show a cut of
about 36 percent per account.

But the hack also served as another wake-up call. Moving
forward, several technical solutions are being proposed to increase
security of Bitcoin exchanges, to hopefully prevent similar
scenario’s in the future.

Here is a brief overview of some of these possible


As of yet, it’s not exactly clear what caused the Bitfinex hack.
What is clear, is that a multi-signature set-up with

to secure customer funds failed to provide any meaningful security.
In theory, both Bitfinex and BitGo’s servers should have needed to
be compromised in order to steal any money. But in practice, BitGo
seems to have co-signed any and

Read more ... source: TheBitcoinNews

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