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Overshadowed by failures, crypto hacking exacts higher price

Peter Feltman, CQ-Roll Call on

Published in Science & Technology News

The cryptocurrency industry is circling the wagons in defense as hackers siphon more money from the sector each year.

Hackers made off with more than $3 billion in digital assets so far this year, according to research firm Chainalysis. In October alone, $718 million was taken in 11 different hacks, making it the worst month in the worst year for crypto hacking, the firm said.

That included $100 million from the largest cryptocurrency exchange in the world, Binance, when its blockchain network, Binance Smart Chain, was exploited.

Experts in academia, crypto exchanges, the research community and the legal industry are speaking out, in the face of increasingly massive losses, to say that hacking does not present an existential risk to crypto as a concept.

Their efforts come as the industry faces more prominent blows — including the bankruptcy filing last month of the FTX exchange and the resignation of FTX CEO Sam Bankman-Fried, a figure who had become a spokesman for cryptocurrency and an influential voice in Washington — and as legislators and regulators struggle to come up with rules. FTX reportedly lent billions of dollars to an affiliated trading business, and now faces several investigations.

In the shadow of FTX and other company failures, the industry is facing a growing hacking problem.

 

Matthew Green, a professor of cryptography at Johns Hopkins University in Baltimore, said the technology is sound, even if the companies employing it may falter.

“You do not see hacks of bitcoin the currency, and you do not see hacks of ethereum the blockchain,” he said during an interview. He noted crypto exchanges that were once big targets for hackers are suffering far fewer hacks than in the past.

“They used to get knocked over all the time,” Green said, giving the example of Mt. Gox, which filed for bankruptcy in 2014. At the time, it was the largest crypto platform, and hackers stole about 700,000 bitcoins from its digital wallets, the computer processes used to store crypto.

The industry has adapted and has implemented much better security, Green said.

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