New Zealand’s Cryptopia was hacked, and more than $2 million in ETH (the currency of the Ethereum blockchain platform) was stolen before Binance saved the day. But this probably doesn’t matter much to you because you don’t use Cryptopia. And this, friends, is the real problem.
We’re not saying that you need to go out and use Cryptopia. It’s a middling exchange with way too many coins for sale and poor trading volume. But things weren’t always this way. Cryptopia used to be a respectable exchange. It was neither the biggest nor the best, but it held its own amidst a crowded field.
Today Cryptopia is a shell of its former self, and this is not just due to the hack. The hack is a symptom of a deeper disturbance, one stemming directly from the ongoing crypto winter from which we all continue to suffer.
The future of cryptocurrency
The world knows that Bitcoin prices have decreased. This prevents new users from entering the space and current users from trading as they might in a healthier market climate. This causes all but the most successful cryptocurrency exchanges (like Coinbase and Gemini) from experiencing extreme user flight. We know from their daily volume data that Cryptopia is one of these latter types.
The Cryptopia hack wasn’t a Mt. Gox scale disaster, but it was a major problem for some.
Crypto exchanges are businesses. Like any other business, if revenue channels dry up, compromises must be made just to keep the lights on. Perhaps, for Cryptopia, some of these compromises were in the security department. Perhaps, as some have suggested, the illicit evacuation of 19,390 ETH was the result of an inside job. The New Zealand authorities are investigating, but it’s likely that the public will never know the full story.
All in all, this is a sad story, especially for users who were affected, but one that many had predicted in advance. Probably no one in the cryptocurrency industry (save for Cryptopia insiders) knew that this exchange, specifically, had a security problem. However, security problems are something of an issue for crypto exchanges in general.
Cryptocurrency exchanges have many vulnerabilities, attack vectors that hackers and opportunists can exploit. Millions can be stolen in this way before the problem is noticed and rectified. Cryptopia is just the latest in a long history of such events, and it won’t be the last.
The only way for crypto users to keep their coins from being stolen in this fashion is to keep large balances off of centralized exchanges. Using paper wallets, hard wallets like the Ledger Nano S, and even secure mobile and desktop software wallets will always be more trustworthy for long-term storage than an exchange with millions (or billions) in assets and a massive digital target on its back.