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Nicholas Colas: hacking of cryptocurrency exchanges will continue


Last week there was a major hacking of the Japanese cryptocurrency exchange Coincheck, as a result of which 523 million NEM coins were stolen. This forced the site to stop operations to withdraw all funds except Bitcoin. The total value of the stolen coins was about $ 534 million at the time of the theft. Although the cryptocurrency market stabilized quite quickly, experts believe that this break-in is just the beginning. In an interview with CNBC, analyst Nicholas Colas said that in the near future, we expect more attacks on cryptocurrency exchanges.

The breakup of Coincheck had positive aspects as well. First, the exchange plans to pay $ 435 million (the current value of the tokens) to the owners of 260,000 accounts that were the victim of hackers. This amounts to more than 80% of the total amount stolen. Given that there could be no compensation at all, users will not be greatly disappointed.

Secondly, the Japanese Financial Services Agency (FSA) has punished Coincheck not as severely as many feared. In fact, the regulator ordered the exchange to fully explain the circumstances of the hacking and introduce a number of updates to prevent "similar events in the future".

In connection with the hacking, Nicholas Colas, co-founder of DataTrek Research, said:

"I think [the attack] does highlight the fact that the industry still has a long way to go in terms of basic issues of security. This is certainly not the first, nor will it be the last, such hack attack on cryptocurrencies and, all things considered, I think they're taking it fairly well in terms of price."

Nicholas Colas explained that Coincheck keeping so much of their assets in a hot wallet was not a good idea. He went on to say:

"Keeping 100 percent of your crypto assets online is a bad idea for an institution, or frankly, for an individual who has a large amount invested in it as well."

Colas also told CNBC that a group, and not an individual, was likely the culprit behind the Coincheck hack. He explained:

"The typical hackers in cryptos have been organized groups [as opposed to] lone attackers. Because, obviously, once you get the coin, you've got to figure out how to atomize it and monetize it in some way and that's a bigger challenge than typically one person can do."

There is little doubt that more crypto exchange hacks will be attempted in the future. The ability to steal virtual currency worth millions of dollars while sitting behind a monitor is too much to pass up.

It's bad enough that normal criminals are trying to hack exchanges, but you now have rogue states like North Korea looking to supplement their revenue by attacking exchanges as well. Better keep an eye on how you store your cryptocurrency. 

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