The Daily: Decentralized Exchanges – New and Hacked, and Some Lost Coins
In today’s edition of Bitcoin in Brief, we cover two decentralized exchanges – an Irish team that’s launching its Local Token Exchange and the already operating Bancor that has reported a security breach and admitted the loss of $12.5 million worth of coins. Also, hackers in China have mined cryptos worth $2 million using malware installed on 1 million computers, and in the US, digital forensics firm Chainalysis claims a fifth of all bitcoin is missing.
New Decentralized Exchange Launches Next Month
Two Irish entrepreneurs are behind a project to set up a new decentralized crypto exchange in Europe. Joe Haslam and Conor O’Connor plan to launch Local Token Exchange (LTE) in August, according to the Irish Independent. The platform aims to enable trading in over 100 cryptocurrencies by the end of the year. It has already gathered a team of nine employees and six advisors.
O’Connor notes that most crypto transactions currently take place on centralized exchanges while there are very few decentralized trading platforms operating at the moment. “Our approach is peer-to-peer and it democratizes the process. Our transactions take place using smart contracts and escrow,” the cofounder explains.
His partner, who lectures in entrepreneurship at the IE Business School in Madrid, says: “When my students look at what’s happening in Venezuela, say, or the fact that the Turkish lira lost 20pc of its value against the dollar this year, I lose their interest very quickly talking about the traditional worlds of finance and accounting when crypto allows a 21-year-old to raise $25m in 15 minutes, as Reuters reported last year.”
Hacked Decentralized Exchange Freezes Coins
While the Irish team is still raising the funds to complete their project, another crypto exchange branded as decentralized proves that maintaining an operating platform of this kind comes with challenges. On Monday, Bancor reported it had experienced a “security breach”. In a tweet, the company assured its customers that “No user wallets were compromised” and informed them that the platform is currently under maintenance.
Updating users on the situation, the exchange later said the details of the breach are still being investigated but released some of the findings. According to the tweeted statement, a wallet used to upgrade some smart contracts has been compromised and used to withdraw ethereum from the BNT (Bancor’s native token) smart contract. The stolen amount, 29,984 ETH, is worth approximately $12.5 million.
Here is the latest update on the recent security breach: pic.twitter.com/JroypFvBri
— Bancor (@Bancor) July 9, 2018
The post details that “The same wallet also stole: 229,356,645 NPXS (~$1M) [and] 3,200,000 BNT (~$10M).” Bancor claims that “once the theft was identified, we were able to freeze the stolen BNT”, explaining that the ability to do so was built into the Bancor protocol to be used in an “extreme situation.” However, the exchange notes that it’s not possible to freeze the ether or any other stolen coins.
The heist and Bancor’s countermeasures prompted comments on social media questioning the decentralized status of the hacked crypto exchange which doesn’t square with the centralized freezing of tokens and shutting down the network.
Chinese Hackers Mine Over $2M in Two Years
Police in the Chinese Da Lian city have arrested 20 suspects, employees of a computer tech company, who allegedly infected over 1 million computers with mining malware. According to the local news outlet Legal Daily, they reportedly mined more than $2.2 million USD worth of digital coins over a period of two years.
The publication details that the hackers developed and embedded the malware in plugins promising faster browsing speeds and other “improvements”. It has been estimated that the ads have reached 5 million computers in the People’s Republic. The hackers also employed a network of more than 100 agents to spread their malicious software.
According to the Chinese investigators, more than a million users have installed the plugins so far. The hackers have mined a total of 26 million units of digibyte, decred and siacoin worth around 15 million yuan. These altcoins do not require a lot of computing power and background mining is harder to detect, the article notes.
$20 Billion Worth of Cryptocurrency Lost
According to a research conducted by New York based company Chainalysis, about a fifth of all bitcoin is missing. The total amount of lost cryptocurrency, mostly bitcoin (BTC), is worth $20 billion dollars, The Wall Street Journal reported. The blockchain-analysis firm says the main reason is the loss of access to the funds as a result of users failing to securely store their wallets or remember their passwords and secret phrases.
Chainalysis does not help people find their lost bitcoin, its senior economist Kim Grauer said. The digital forensics firm noted, however, that it can point out “at least one counterparty for 80 percent of all bitcoin transactions.” It has been reported as well that the US Federal Bureau of Investigation (FBI) has successfully tracked down almost $1 billion in lost cryptocurrency revenue in the last two years.
At the end of 2017, Chainalysis published a similar report claiming that access to almost 3.8 million bitcoins might be permanently lost. Wallet Recovery Services, a company that helps users remember passwords to their crypto wallets, claims it has about a 30 percent success rate.
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