The digital currency markets repeatedly remind us of a tired but true maxim: your money is only as secure as the bank that guards it.
After a recent hack resulted in the theft of $70 million worth of bitcoin, Hong Kong-based Bitfinex caused a minor panic when it announced it would spread the losses equally among all its customers, even those whose holdings weren’t touched. In doing so, the exchange called our attention — yet again — to how vulnerable virtual currencies are to criminals who hack through the Internet-connected systems that handle money transactions.
Proponents of the technology behind bitcoin say the problem isn’t with the blockchain technology that underpins the currency but rather with the way exchanges store the code that determines ownership. In other words, the banks’ security is to blame.
Bitfinex, one of the world’s largest bitcoin exchanges, was hardly the first to suffer from a cyberheist. The most famous robbery came in 2014, when the Tokyo-based exchange Mt. Gox announced $480 million had been stolen by hackers and filed for bankruptcy. Its customers are still waiting to a claim a fraction of their deposits.
This latest theft is rattling the cryptocurrency community. “The failure of one company to secure the private keys of its users is casting a shadow, unfairly, over the bitcoin ecosystem,” Alex Tapscott, co-author of