Huobi User Protection Fund was introduced by Huobi pro to protect users' interest and compensate for their losses in cases of emergency.
Throughout bitcoin and cryptocurrencies history, we have witnessed horrible atrocities of hacking and stealing of private keys. Most exchanges are vulnerable to security breach due to low focus on their security systems. They store their funds within one private key, and when hackers have access to that private key, they have access to all the funds. Some exchanges are starting to store their funds in a cold wallet while others introduced an insurance to payback affected users after a security breach such as the Huobi User Protection Fund.
Here are the five biggest cryptocurrency hackings in history:
#5 Parity Wallet (July 2017)
In July 2017, hackers found a flaw on the Ethereum backed wallet, Parity. The theft involved resulted in 150,000 Ethers being stolen from the wallet (approx $75 Million). An unknown user was able to access the funds to perform the second biggest Ether hack after the DAO.
#4 The DAO (June 2016)
The Decentralized Autonomous Organization (known as The DAO) was meant to operate like a venture capital fund for the crypto and decentralized space. Since its early days, developers expressed concerned to one of the biggest ICOs in history. Two months after its creation, the DAO was hacked for more than 3.6 Million Ethers (approx $157 Million). The results of the security breach led to a soft fork and the creation of Ethereum Classic.
#3 Bit Grail (February 2018)
One of Europe's largest crypto exchanges suffered a major breach worth 17 million XRB ($165 Million). Some reports claimed that founder of Bitgrail, Firano:
mismanaged customer assets and was claiming a “hack” as cover. (FORTUNE)
XRB token originates from the NANO foundation previously known as Raiblocks. The NANO team has responded to the hack by sponsoring legal support to the affected parties.
#2 Coincheck (January 2018)
One of Japan's biggest crypto exchange was hacked early 2018 for a total of 500 million Nem (Approx $165 Million). The exchange kept their customers funds inside a hot wallet, and when a thief has access to it, they can steal most of the funds. After a Japanese brokerage firm acquired to digital assets exchange, they have decided to work on a refund plan to pay back affected users.
#1 Mt Gox hack (June 2011)
Mt Gox was handling 70% of bitcoin transactions at the time of its hack. It is reported that 2,609 BTC were stolen, with another 750,000 BTC mysteriously missing. Taking into the account the bitcoin missing thats an approx worth of $7 Billion! Many users are yet to be compensated, there is a huge scandal that they will be paid back in accordance to the value of bitcoin at the time of the hack ($450).
Huobis solution : Huobi Buyback and the Huobi Security Reserve.
The Huobi team has introduced a 20,000 Bitcoin reserve and will act as insurance in the case of any security breaches.
Other solutions: Store the funds in a off site cold wallet. The ledger wallet and other cold wallets offer their services to the consumers, maybe a big company can step it up and find a solution to major exchanges?
By Menajem Benchimol