2017 Bitcoin and Ethereum Hack due to Flawed Code, not Flawed Currency

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2017 Bitcoin, Ethereum Hack, ether bitcoin
Geralt | Pixabay.com

In the wake of this year’s Bitcoin & Ethereum hacks, Edgy Labs turns to the “how” behind this next-gen consumer fraud.

A hack resulted in millions in Bitcoin and Ethereum being stolen recently, but this isn’t because the cryptocurrencies themselves are susceptible to hacking.

Rather, it’s due to flaws in each of these platforms’ code.

This might seem rather familiar, since, a few months ago Bitcoin exchange company Yapizon was also hacked and over 3816.2028 Bitcoins were stolen. You may have also heard of Cloud Mining Ponzi schemes & scams such as Gawminers, Hashocean, Cointellect, Biteminer, Hashpoke, Hashinvest.

Why have these “advanced” platforms been prone to attacks lately, while other (smaller and arguably “less secure”) cryptocurrency platforms have been left unaffected?

Simply put, the more complex security protocols are, the less safe they become. Since codes are written and peer-reviewed by human beings there will inevitably be answers in the code. This is why simplicity and testing are the backbone of digital security.

How did the 2017 Bitcoin & Ethereum Hack Happen?

The 2017 Bitcoin hack was caused by a flaw in the SS7 system (and had nothing really to do with cryptocurrency itself).

Ethereum is based on Bitcoin technology, but smart contracts and other features of the code improve upon Bitcoin’s base. This is actually the very thing that makes it susceptible to hacks: it is overly complex. Plus, Ethereum is not centralized in any physical place, but rather expands a huge, decentralized network.Moreover, Ethereum is one direction: if flawed code is put out there, it stays out there.

Interestingly, most blockchain developers come from the web development world, and blockchain code is written to be similar to web developing code. However, the two are very different and have very different purposes.

Does this mean Bitcoin is dead?

In a word: No.

Most people wouldn’t stop using banks altogether because a single bank in the world had been robbed. Instead, they might, however, demand greater security measures. The same principle applies here.

As Brian Stretch, U.S. Attorney for the Northern District of California said:

“Just as new computer technologies continue to change the way we engage each other and experience the world, so too will criminals subvert these new technologies to serve their own nefarious purposes”.

Our job as consumers of ether bitcoin (and others) is to innovate cryptocurrency security and develop safeguards against the exploitation we know currently exists.

Do you agree? How do you think we can improve the digitization of currency to make it safer? Is it absolutely impossible to create a platform that’s hacker-resistant?

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2 COMMENTS

  1. Sometimes I have been thinking, whether operators highlight these hacks to single platforms as a way to hide wider risks, which are common to all cryptocurrencies. Otherwise with single banks, cryptocurrencies may meet threats as a whole system. Nearby all articles handle these thefts and similar things. Would be interesting to read also from:

    What happens, when one currency is totally mined? As I understand, Bitcoin miners are paid with new coins from updating blockchains of paying transactions. Is valuation rising because of less Bitcoins are paid from progressive calculations? Demand and supply, I know, this sounds stupid. Perhaps in future cryptocurrency users pay a transaction fee to cover these calculation costs.

    Direct stealing and forgery may be difficult, but could blockchains and transactions be sabotaged? There might be many reasons, one is easy money. I don’t know whether there is already trading with cryptocurrencies and especially can they be sold short. Someone could first short cryptocurrencies, publish information of critical lacks in transactions and cash the deal. The lack needs not to be correct, it’s enough that it seems to be plausible.

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