As Bitcoin and cryptocurrencies continue to rise in value, they become ripe targets for hackers, who have now forced a relatively unknown South Korean cryptocurrency exchange, Youbit, to file for bankruptcy.
This is the second time hackers managed to access user funds on Youbit (not to be confused with Yobit), having made off with around 4,000 Bitcoins back in April (when the exchange was known as Yapizon).
While the exchange did not announce the exact amount of Bitcoins lost this time, it shared that the hack took place today, at 4:35 AM, and attackers managed to take 17% of the exchange’s holdings.
Their official statement apologized for the funds lost, and announced that all trading has been stopped. It also stated that every option will be explored in order to reduce losses, while presently all user assets will be marked down to 75%.
Meanwhile, it is reported that the Korean Internet & Security Agency (KISA), will be investigating the attack.
Even though cryptocurrencies are quite robust themselves, protected by complicated cryptographic algorithms, their safe storage is a different matter altogether.
Just like paper money or physical assets like gold, cryptocurrencies are kept in wallets, which can only be accessed via a special pair of public and private keys. Anyone who has access to a wallet’s private key, can withdraw and move all the funds, and even though such thefts can be tracked on the blockchain, once lost, they cannot be recovered due to the technology’s immutable nature.
One of the most prominent and largest Bitcoin thefts was the Mt. Gox scandal, which saw, the once mega-exchange losing over 744,000 Bitcoins, worth more than a staggering $14 billion at current prices.
Given all this, it cannot be stressed enough that holding cryptocurrencies on exchanges is extremely risky, particularly for those who use exchanges for storage. If you are going to be holding a cryptocurrency for long, it is highly advised to move it to a secure, dedicated wallet, whose private keys are under your own control.