Coinrail Hack Raises Concerns Over Crypto Security

The cryptocurrency markets took another nosedive on Tuesday, following the heavy declines seen on Monday. Causing the crypto markets to lose more $42 billion in value over the last few days, was news that Coinrail, one of the largest South Korean Cryptocurrency exchanges, was victim to a Bitcoin hack on Sunday which saw 40 billion South Korean Won stolen by unknown hackers.

Just as the crypto markets hit their highest levels since January, news of the hack, which was made public on the Coinrail Twitter feed, saw 10% wiped off the value of Bitcoin within just one hour. Steep declines were recorded across the board in the crypto markets and today saw Bitcoin, the daddy of the virtual currency world, fall to a two-month low.

Sunday’s hack, which saw 30% of all held coins stolen, follows on from further high-profile hacks which are seemingly hitting the confidence of crypto investors. In January of this year, nearly $500 million worth of digital currencies were stolen from Japanese exchange Coincheck Inc. in what was one of the biggest heists in crypto history. The amount just topped the $473 million stolen from Mt Gox in 2014, where 70% of all global Bitcoin trading volume was handled.

The threat of an attack and theft hangs over the cryptocurrency world. Even moving digital currencies away from the exchanges into personal self-hosted digital wallets is no guarantee of safety. The threat of a 51% attack which could affect almost any coin appears to be dissuading investors from the crypto sphere. For those that do not know, a 51% attack refers to an attack on a blockchain – usually small coins or forks of Bitcoin (ther is no real proven record yet of 51% attack on Bitcoin itself), by a group of miners controlling more than 50% of the network’s mining hash rate, or computing power.

There is a real concern that as well as crypto exchanges and platforms are not investing heavily enough into cyber security, miners simply hold too much power. As we saw in December 2017, when the miners can earn increasingly large amounts of money in transaction fees by auctioning off limited space in a Bitcoin block, they will act in their self-interest to maximize profit.

So, what’s the answer? Well, the obvious is for platforms and exchanges to improve their security and invest more to prevent hacking. Crypto investors are always advised, unless regular traders, to store their virtual currencies in hardware digital wallets or even paper wallets.

One possible solution is presented by Skycoin, which offers a decentralized network that, unlike Bitcoin forks / other coins, is immune to 51% attack. Built as the network that fulfill Statoshi’s original vision, Skycoin reconfigures the inner workings of blockchain with its ‘web of trust’- providing a new type of consensus algorithm which solves the fundamental flaws of PoW and PoS, which leave other tokens and coins vulnerable to attacks.

For the crypto world to maintain or even rebuild trust in its virtual currencies, there needs to be better protection. Exchanges need to do more to protect its users and the users themselves need to do more to protect their coins. Projects like Skycoin certainly point towards a more secure crypto future. However, as we saw in the Coinrail hack on Sunday, there is still a long way to go by everyone involved to make the crypto sphere a more secure and trusted environment.