Cantillon: another bad day for virtual currency Bitcoin

Another bad day for Bitcoin. A €63 million heist saw the virtual currency tank on Wednesday, although for some it is as inevitable as an old fashioned bank robbery.

The digital currency was plundered in a hack attack on the Hong Kong-based Bitfinex exchange, reducing its trading value by about 20 per cent early on Wednesday. It recovered about half of that loss later in the day.

Reporting of the digital heist brought with it the inevitable media scrutiny – the latest targeting of the fashionable crypto-currency is surely a blow to user confidence.

Zane Tackett, Bitfinex's director of community and product development, said in a post on Reddit the thieves had made off with 119,756 Bitcoins, worth over €63 million.

It brings us back to the 2014 collapse of Mt Gox, a Tokyo exchange, where hundreds of thousands of Bitcoins were stolen.

Tackett told Reuters the breach did not “expose any weaknesses in the security of a blockchain”, the technology that generates and processes the currency.

Alan Donohoe, at the Irish Bitcoin Foundation, is unfazed by the incident despite recognising the amount of money involved.

Hackers

“It’s a little blip,” he said. “An exception to the rule. It’s open to anyone to try and hack it, it’s internet money, but there are many hackers around the world that attempt it – most will fail.”

For many Bitcoin experts, including Donohoe, the incident does little to damage the currency’s credibility. “At the end of the day how many banks have been hacked? The money is still there. It’s down to a lapse in security, but that’s only getting better.”

In June another hacker stole more than $50 million worth of Ether, another digital currency, from an experimental virtual currency project called the Decentralised Autonomous Organisation.

Jack Liu, chief strategy officer at OKCoin, a large digital currency exchange, told The New York Times he was not concerned about security, but said there should be more discussion between exchanges over best practices. "Hackers are only getting better and so adoption of the same solution may not be the safest for the industry."