Security Issues Plague All Financial Platforms, Not Just the Bitcoin Ones

The cryptocurrency community was recently shaken by the hacking incident faced by one of the reputed Bitcoin exchanges in the world. The Bitfinex incident earlier this month led to over $72 million in losses.

The loss of 119,756 bitcoins during the Bitfinex security breach makes it the second highest loss connected to an exchange till date. Mt Gox, the now defunct Japanese Bitcoin exchange tops the list with a loss of over $350 million, reportedly stolen by hackers. This year alone, some of the well-known cryptocurrency platforms like ShapeShift and Gatecoin were targeted by hackers.

According to reports, over one-third of all cryptocurrency trading platforms have come under attack, resulting in the theft of an undisclosed amount in Bitcoin. While these numbers go back as far as 6 years, the current security situation is no better.

Security breaches have become a common occurrence in the present world. With almost everything being connected to the internet at one point or another, puts them all at risk. However, for hackers, the rewards are much higher when it comes to Bitcoin platforms due to multiple reasons. For starters, Bitcoin is by itself a digital financial asset that can be easily transferred without having to go through regular centralized channels. Also, Bitcoin transactions are pseudonymous and the identity of the parties to transactions are not readily known (except for their wallet addresses). Even the lack of Bitcoin regulations has somehow reduced the legal accountability associated with digital currency-related crimes.

Tyler Moore, a cyber security faculty at the University of Tulsa’s Tandy School of Computer Science says,

“I am skeptical there’s going to be any technological silver bullet that’s going to solve security breach problems. No technology, crypto-currency, or financial mechanism can be made safe from hacks,”

An article on a reputed news website provides statistics obtained from a U.S Department of Homeland Security-funded research. In addition to covering the security risks faced by Bitcoin trading platforms and exchanges, it also refers to conventional financial institutions. It states that about 67 US banks have experienced security breaches in the period of 2009 and 2015. Over half of the 46 securities exchanges across the world were also compromised at one point or another until 2013.

The number of security incidents faced by traditional financial institutions is no less than those faced by Bitcoin-based businesses. But Bitcoin businesses bear the brunt of the losses when struck by hackers as there are not many insurance companies willing to offer them coverage.

In the end, it is true that the cryptocurrency businesses face a much higher risk of cyber-attacks and thefts. But, with the development of advanced blockchain analysis tools and increased acceptance of digital currencies, these may soon become things of the past.

Ref: Reuters | Image: NewsBTC