Approximately $72 million worth of the digital currency, Bitcoin, was stolen from the Bitfinex Exchange in Hong Kong in the second-biggest security breach ever for this type of currency. In an interview on Wednesday with Reuters, Zane Tackett, Director of Community & Product Development for Bitfinex, said that 119,756 bitcoins had been stolen from users’ accounts, and that the exchange had not yet decided how to address customer losses.
— IGSquawk (@IGSquawk) August 3, 2016
Bitcoin’s stock plummeted when news of the hack was released, losing nearly 20 percent of its value in three days. Bitfinex halted trading, withdrawals, and deposits as soon as it found the security breach. It is not the first time the digital currency has been hacked, but it is calling into question the overall security of Bitcoins.
If you aren’t quite sure what Bitcoin is, you aren’t alone. The currency burst onto the scene in 2013, and as Bloomberg reported, it was used for everything from drug deals to cupcakes. Although the name had been popping up since about 2009, the early version was hacked often and was largely used for black market type stuff.
— TechEffecto (@TechEffecto) July 4, 2016
Bitcoin wasn’t the first digital currency by any means. If you play any fantasy or online video games chances are you have used one in some way to purchase extras for the game. What it did do however, was provide a more secure digital currency without a central issuer which is what caught people’s attention. Satoshi Nakamoto, the person or persons who created Bitcoin, came up with a way to control the issuance of the currency and prevent counterfeiting, and did it without relying on any government authority.
In 2013, the Winklevoss twins (the brothers who famously sued Mark Zuckerberg over Facebook) owned nearly $11 million worth of Bitcoin, and they proposed a stock-like system where investors could trade cryptocurrency. In 2014, the total Bitcoin market was worth approximately $7 billion, according to 99 Bitcoins, and it didn’t seem to be slowing down.
Throughout 2014, several big name companies, including Dell, PayPal, and Microsoft began accepting Bitcoin payments and really helping the currency to take off. But they have also been plagued by hacks as well.
In 2015, there were several high profile hacks of Bitcoin, according to Coin Fox. The year started out with a big hit when BitStamp, a major Bitcoin exchange platform, lost 18,866 BTC, which was equal to nearly $5 million at that day’s exchange rate. It totaled 12 percent of its total Bitcoin capital. In that instance, however, no customer money was affected by the hack. Throughout the rest of 2015, there were at least six other major hacks of Bitcoin companies, where a combination of customer money and company money was lost. Persistent hacking closed down at least one company, when Canadian Bitcoin exchange company Cavirtex closed its doors.
— BitcoinAgile (@bitcoinagile) June 23, 2016
In addition to hacking concerns, many scams have popped up in association with the popular cryptocurrency. Reuters reports that last year MyCoin, a Bitcoin company in Hong Kong, got involved in a large scale scam that media estimated could have duped investors of up to $387 million. The company closed after the scam was exposed, but the damage was done.
Bitfinex has reported the current hack and theft to law enforcement, and is cooperating with blockchain analytic companies to track the coins that were stolen. Blockchain is a publicly visible, anonymous online ledger that records every single bitcoin transaction. The ledgers are maintained by Bitcoin “miners” who validate each transaction to prevent coins from being used more than once. If the stolen Bitcoin is tracked properly, they should be able find it.
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