Binance And The Bitcoin Heist Problem

Once again we’ve a story about a cryptocurrency exchange losing a decent enough amount of money to hackers. This time it’s Binance who say they’ve lost some $41 million worth of Bitcoin to hackers. The criminals were able to use phishing attacks to gain access, then they were able to access the hot wallet – the one actually in use that is, not the long term storage cold wallet – and so make off with the funds. They were also clever, in that they used multiple accounts to withdraw the funds thus enabling more to be taken in many smaller amounts before the exchange managers realised what was happening.

As with what we’ve been seeing elsewhere in the crypto world, we’re seeing the reinvention of all the varied crimes to which money can be subject. Every monetary and banking scam that anyone’s uncovered in the past few thousand years is being tried out again in this new sector. Here it’s that the bank robbers are becoming more sophisticated – akin to that Hatton Garden job rather than the 1960s version of blaggers with shotguns storming the cashiers’ desk.

However, there’s one little point here that needs more attention:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] However, he told Binance users that he and his colleagues were working to secure the exchange and prevent any further hacks. And he added that he was asking other exchanges to block bitcoins associated with the hacked wallet from being transferred elsewhere, which would render them largely useless. [/perfectpullquote]

This is something all too few realise about Bitcoin. Sure, it’s anonymous but it’s not untraceable. Quite the opposite, it’s possible – with enough effort – to track back through every transaction any specific Bitcoin has been involved in. That’s actually rather the point of the blockchain database.

And there’s a significant implication to that. Sure, we’re happy with stolen Bitcoin being unusable. But what happens if and when the authorities decide that they’d like to declare the Bitcoins of some specific person unusable? And who thinks that such a power will go unused in the bright new future approaching? For example, what if they decide that a Bitcoin once used in a drug transaction should now not be valid?