Binance's 7000 BTC Hack: What we know so far

08 May, 2019
by Will Heasman
Hack
Binance's 7000 BTC Hack: What we know so far

Today, Binance, the worlds largest cryptocurrency exchange was hacked, reporting a loss of 7000 BTC. So what happened? How did attackers compromise the exchange? And what does this mean for the future of Binance?

What happened?

Earlier today it was announced by exchange Boss, Changpeng ‘CZ’ Zhao, that Binance had suffered a “large scale security breach.”

According to the official announcement, the actual attack occurred on the 7th of May at 17:15 UTC, with attackers pilfering a reported 7000 BTC in user funds, a current USD equivalent of $40.8 million; a figure which amounts to 2% of Binance's total BTC holdings.

The massive appropriation apparently occurred within a single transaction:

How did attackers compromise the exchange?

According to Binance, attackers managed to abscond with a large number of user API keys, and 2-factor verification codes using a variety of techniques, including phishing, the use of viruses, and “other attacks,” which the exchange is still trying to identify.

The official announcement notes that the 7000 BTC was stolen from just one affected hot wallet, leaving all others “secure and unharmed.”

Attackers allegedly executed the “well-orchestrated” hack at “the most opportune time,” allowing the assailants to pass through security checks before the exchange could block the withdrawal.

Are funds SAFU?

According to the exchange the Secure Asset Fund for Users (SAFU) has been put into effect in order to cover the incident in full; meaning that regardless of the loss of 7000 BTC, no users will be directly affected by the hack.

SUFU was created in July last year and promised to store 10% of all trading fees in order to cover losses from compromises such as this.

While it's been a quasi meme through the crypto community, it seems the #SAFU initiative has pulled through, allowing reassurance for many Binance users.

Will Binance be affected?

For now, it seems as though the exchange, along with its CEO has got things mostly under wraps; urging investors and partners alike, not to panic.

Despite a plethora of pledges offering to cover the losses – including one from Justin Sun - CZ respectfully declined, citing the  SUFU fund, and adding “we are hurt, not broke.”

Is Binance still operational?

While Binance conducts a “thorough security review,” - which includes every nook and cranny within the system and data of the exchange - deposits and withdrawals will remain suspended. The official announcement estimates that this will require around one week before the exchange is fully operational again.

Interestingly, trading will continue, allowing traders to adjust positions. However, the exchange adds the proviso that hackers may still be in control of affected user accounts, stating that these bad actors may “use those to influence prices in the meantime.”

The exchange continues to monitor the situation and believes that there “isn’t much incentive for the hackers to influence the market.”

In an AMA CZ noted that trading may be disabled in sporadic periods during the course of the next week:

“There are a few system upgrades we have to do this week. There may be small periods of time where we have to hold trading for a couple of hours here and there for some of the core system upgrades because we actually do need to make some changes in the system.”

Bitcoin rollback?

At one stage today, it was suggested that a rollback of the Bitcoin network take place, in order to redistribute the stolen BTC to miners, and snub the hackers - as well as potentially dissuade future hackers – in the process.

However, ultimately it was decided that a “re-org approach” would do more harm than good:

 

Within the aforementioned AMA, CZ addressed the pros and cons of a Bitcoin rollback; the pros being that Binance could exact “revenge” on the attackers by moving fees to miners, as well as deter future hacking attempts.

The cons included the potential centralization to, and damage of, the Bitcoin network, CZ noted the several devastating outcomes of a re-organization: 

How did the market react?

Amazingly in the fallout of the hack of the worlds largest crypto exchange, BTC had a surprisingly stable response, managing to hold above $5,700 despite the troubling news.

BTC/USD Chart provided by Tradingview

BNB however, didn’t get off so lightly, dropping by approximately -9.5% following the news, subsequently rebounding a few hours later. At press time BNB is citing a -6.8% decline in 24 hours.

 BNB/USDT Chart provided by Tradingview 

So there we have it, one of the largest exchanges in the world, hacked. What is your opinion on all of this? Do you think this latest hack is a cause for concern? Let us know your thoughts in the comments!

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