Fourth Cryptocurrency Heist in a Month – SEC May Step In
An undisclosed attack vector allowed a hacker to steal $8.4 million in Ethereum, a competitor to Bitcoin, during it’s “initial coin offering”. This is the fourth time this month Ethereum alone was attacked, not counting attacks on other cryptocurrencies (Bitcoin and Ethereum are two popular cryptocurrencies – that is, so called currencies based on cryptography).
For the most part currencies, at least recognized ones such as the dollar or the euro, are regulated, controlled and guaranteed by governments. None of that is true for cryptocurrencies.
The other hacks include a $7 million hack of Coindash, a $32 million hack of Parity and a $1 million hack of Bithumb.
Prior to panicking, where is there is money there are bandits.
People rob banks and we don’t stop using them (at least most people still use them).
People hack credit cards and we definitely still use them.
Hacking financial institutions has gone on for a long, long time.
Since cryptocurrencies are not regulated or guaranteed by any government, you are on your own when it comes to recouping losses. That fact not withstanding, Bitcoin, one of the most popular cryptocurrencies has gone from a value of $1.00 in early 2011 to $2,674 today. People love to speculate and as long are you are not doing that with the rent money and understand the risk, that is fine. People take risks all the time.
Since most cryptocurrency solutions are startups, many, likely, don’t even have insurance.
In some cases the people who lost their money get paid back; sometimes they don’t. The issue with blockchains, which are behind most if not all cryptocurrencies is that they are supposed to be unchangeable, so to reverse a transaction violates “the prime directive”. In at least one case that I am familiar with, that is exactly what happened. They got their eraser out and deleted a transaction.
Not surprisingly, governments are watching what is going on with distinct interest and Reuters is reporting that the U.S. Securities and Exchange Commission is looking at regulating “Initial Coin Offerings” or ICOs. While ICOs are not securities in the sense of an investor owning shares in a company, they are certainly an investment and as the SEC is responsible for protecting investors, it would make sense that they would be looking at this. One reason that companies are issuing ICOs instead of IPOs is that they are not regulated, there is limited paperwork required and they don’t have to disclose investor risks at the same level that they would if they were doing an IPO. Stay tuned to see if the SEC does in fact take action. One question is whether or not ICOs are even in their regulatory authority or whether Congress would need to pass a law to allow them to do that.
All this means is that the cryptocurrency market is young and turbulent and investors should assume some degree of hiccups and loss.
One thing that makes Bitcoin, for example, different than the dollar, is that Bitcoin exists totally in the world of software and software always has bugs. Hackers love to find bugs. And exploit them. As long as investors understand the risk, the market will evolve.
Information for this post came from The Hacker News and Reuters.
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