In yet another high-profile exchange hack, Binance announced that they had lost 7,000 BTC. The equivalent of $40 million USD, this Bitcoin (BTC) heist comes on the heels of several other major hacks. Yet, Binance is one of the most trusted exchanges in the cryptocurrency industry. There is an increasing belief that security in the industry is insufficient – a problem that could have serious repercussions. The industry depends on safety of exchange funds and storing digital assets.
Binance quickly pledged to absorb the damage of the hack, using exchange owned funds to compensate impacted users. Unfortunately, this is a Band-Aid at best for a more prolific problem. If hacks continue at their current pace, smaller exchanges could face insolvency. Binance may fare better, but will still need to ensure security – something that they are now actively seeking to improve. The larger issue comes with Binance’s initial approach, where CEO Changpeng Zhao attempted to form an agreement among major BTC miners to roll back or “reorg” the blockchain.
The Specter of Reorganization
Even the suggestion of a Bitcoin blockchain roll back is anathema to the industry as a whole. While some alt-coins survived such actions, most notably Ethereum after the DAO debacle, Bitcoin serves as the backbone of the entire cryptocurrency market. Proving Bitcoin itself to not be immutable would be a death blow to the industry itself.
Luckily, the ‘reorg’ did not occur. Zhao consulted several influential people within the industry, all of whom advised against the action. While Zhao and Binance may have the clout necessary to push such a roll back, it would be ill advised and irreparably damage Bitcoin’s reputation. Yet, even the threat of such an action could send aftershocks through the community.
Despite Bad News, Bitcoin Thrives
For now, Bitcoin remains utterly unaffected by the hack. In the midst of an increasingly strong bull run, Bitcoin shrugged off the Binance hack news and continued to breach $6,000 USD per coin. This is the strongest performance since the crypto-bubble burst at the start of 2018, and BTC dominance over the market continues to grow.
Unfortunately, alts are not following suit – yet. Many of the major altcoins are suffering as value vacuums away and into Bitcoin during this surge. This is a pattern we’ve seen before. If Bitcoin stabilizes, we may see some value seep back into altcoins alongside a drop in dominance. However, there is no guarantee that information from the past predicts future performance.
Article By: Adam Stone