Bitfinex.com, a Hong Kong based digital currency exchange has halted all trading after hackers made off with an enormous $65m or 119,576 bitcoins at existing prices. This is the latest security lag around cryptocurrency, in what is unraveling as a year of trial.
The exchange reported the security breach on Tuesday, August 2nd.
At the time of the incident, the bitcoin was trading for $527.25, but its price crashed down to $500 as news of the theft spread. The digital currency has subsequently rallied to $564 as of August 6.
Other digital currencies are exchanged at Bitfinex, including litecoin and ether, but the site said only bitcoins are affected.
It is speculated that this loss translates to 20% of Bitfinex’s funds.
The same exchange reported a similar incident in May last year where 1,457 bitcoins were stolen. This was a security breach in its hot wallet deposit system for its users, representing 0.5 percent of all customer deposits at that time. Bitfinex subsequently partnered with BitGo to implement individual multi signature wallets for customers.
Bitfinex is the biggest exchange in volume on the USD-BTC pair representing about 50 percent of volume.
This is not an isolated case because other exchanges have lost money in security breaches this year. In June, a similar amount of ether currency traded by Ethereum exchange was exploited through weak coding in DAO’s smart contract system. Yet in May, Gatecoin was hacked and cash in the tune of $2m lost. A month earlier, Shapeshift had reported a security breach which it described afterwards as an inside job by a former employee.
These incidents are dwarfed by the shutting down of the Tokyo-based Mt. Gox in 2014, which collapsed after losing the historic $474m or 850,000 bitcoins, through what was described as transaction malleability fraud scheme whereby the exchange was duped into re-sending customer withdrawals.
One may ask, is this a testing time for the security of cryptocurrency?