Taking a look at the market yesterday, there's actually some massive sell-off happening with many top-currencies.
Almost everything was in red as I was watching the market. We want to know what could have caused that since we're expecting the futures market to potentially drive the market up.
News in Japan says that Japanese cryptocurrency exchange Coincheck exchange froze all withdrawals as up to 723 million dollars left its wallets this Friday. As you know about 40% of the volume is made up of Japanese investments so this is really significant. Coincheck suspended all withdrawals as payments worth $723 million left his wallet. They’re really concerned with why that much money came out of their wallets so they had to hold all withdrawals and restrict deposit. Users were advised to refrain from making deposits as there would be delays in reflecting deposits to their balances.
After only a few hours, early suspicions were confirmed. -Coincheck was hacked. People started to get worried when their deposits were put on hold. People started to research what was going on and soon enough, Coincheck followed it up with restricting withdrawals, the sales and basically doing anything became impossible. It was very similar to what happened in Mt.Gox. The conditions were different though, since then, the amount that was stolen at Mt.Gox was around $400 million, something that was a big chunk of the market cap of cryptocurrencies. Now, $723 million is much less in terms of proportion to the whole market cap.
During a late-night press conference, Coincheck president Wakata Koichi and Chief Operating Officer Yusuke Otsuka estimated the exchange had lost at least $400 million worth of the NEM cryptocurrency’s XEM tokens. As a result, Coincheck has halted all operations and the price of XEM has tumbled nearly 10 percent at the time of writing. NEM is the tenth largest cryptocurrency according to CoinMarketCap. Source
This event rekindles the debate on whether exchanges should be regulated or not. Because of hacking incidents like this, governments have a reason to step in and impose regulations particularly with regard to security. Regulations may follow in other places as well because this looks like the perfect excuse for governments and regulators to take action.
When a hack like this happens, it really does a lot of harm to the entire ecosystem.Some people may not care at all because it’s not they’re money that was lost but we need to think about the bigger picture and the bigger picture is: Because of these hacks, we can potentially see big moves from regulators and the thing is 700 million dollars disappeared/left the exchange, Well it is a lot of money although others may have gotten used to hacking and scams, so this kind of news may not be as ‘big’ as before. Hence, we need to think about security.
In my previous post, I discussed how ransomware works. This time, let’s review some security measures in general. If you store your coins on an exchange, you are trusting that exchange to handle your funds and you’re trusting it to not to mismanage their employees because if you are an employee on an exchange and technically maybe you have access to customer data, like private keys, the exchange needs to have good policies in place to keep the company running as intended. There must be policies such as even if the CEO simply wanted to do something bad, there’s no way unless 10 other people sign the transaction or something like this. The thing is, there are so many changes and not all of them are serious with regard to security measures.
The first thing that Japanese authorities may ask is: “How’s the security at Coincheck?”
Lax security measures protecting this smaller cryptocurrency seem to be at the root of this issue. Yuji Nakamura, a Bloomberg tech reporter based in Tokyo, attended the Coincheck press conference and tweeted the exchange was not using multi-signature — an additional layer of security for cryptocurrency transaction — for XEM transfers. Source
-This is already beyond our control so let’s think about how we store our coins, about the different types of storage and the different pros and cons with the different types of storage.
Why do we have hardware wallets?
Why can't you just use a ‘hot’ (online) wallet? The most important consideration is, most computers we use for trade are connected to the internet like 90-100% of the time. Viruses can come in and make it through the antivirus but that’s not the case in a hardware (cold) wallet. The problem is, hardware wallets can be lost, damaged or physically stolen. Some people already lost millions of dollars worth of cryptos by forgetting a password they need to retrieve/decrypt their private keys. Having a memorable passphrase isn’t a guarantee that one will never forget it. Let’s face it. Maybe everyone of us has forgotten an email password before right? Keeping passwords backed up online also poses a risk, since viruses inject keyloggers or takes screenshots of your screen. They’re just waiting to be triggered so they can get a hold of your information. This is not to scare anyone but it really happens.
Being in the cryptocurrency space, we should have full control of our funds. We don’t trust banks or other entities with our money. Even banks’ computers get hacked by people halfway around the globe, so, as far as I’m concerned, we should reduce and spread the risk for us to be less vulnerable to attacks. That is, not leaving a huge amount online, having your coins kept in different places and always having a second layer of security to prevent loss of funds.