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Crypto news: Hackers steal $41 million worth Bitcoin from Binance, why exchanges aren’t secure.

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Binance, the pioneer behind the IEO model of fundraising and among the largest crypto exchanges in the world, said hackers withdrew mind-boggling $40 million worth of cryptocurrencies from its exchange.

Hackers employed a diverse array of techniques to accumulate a large amount of its client’s data to facilitate the Bitcoin transaction from Binance exchange, including phishing and malicious programmes according to a report by Bloomberg.

CEO of Binance exchange-Zhao Changpeng or more commonly known as CZ in the crypto space revealed that the malicious transaction was limited to Binance’s hot wallet which holds less than 2% of the company’s total Bitcoin holdings. Also that Binance will be suspending all deposits and withdrawals on its exchange for a week to conduct an in-depth security review of its systems.

If you’re a trader on Binance’s platform, fret not! CZ also mentioned that the company will be using its #SAFU or Secure Asset Fund for Users to cover the security breach so that no user fund is affected.

So why were hackers able to steal BTC from Binance’s hot wallet?

According to CZ’s post hackers used phishing attacks and viruses to obtain the individual data of users. But we can trace the root cause of this security threat to Binance’s hot wallet. 

Hot wallets are in essence cryptocurrency wallets that are connected to the internet and this inherent nature of hot wallets leaves them at substantial risk of cyber threats. A much safer option is to use cold wallets as they are not connected to the internet and is much more secure as they are often kept safely in a secure location.

As long as hot wallets are connected to the internet there is a significant risk of cyber threats but what can be done is reduce the risk through exhaustive security measures.

But this needn’t be a cause for worry as only 2% of Binance’s Bitcoin holdings, the rest is presumably stored in cold wallets that are placed in secure locations. Despite hotwallet’s inherent technical limitations, Binance could have taken extra precaution especially when considering the incredible influence the company wields over the crypto space.

The influence Binance wields

Founded just over two years ago, Binance quickly grew to become one of the largest cryptocurrency exchanges in the world at a valuation of over $1.3 billion. According to InWara’s Venture Funding database, Binance received a $10 million investment while the company was still in its nascent stages. The investment round witnessed VC heavyweights such as Sequoia Capital among others participating.

In 2017, just a few months since its first capital investment round, Binance launched its own Initial Coin Offering and managed to raise a whopping $15 million (source). You’re more familiar with the rest of the story, Binance gained ground rapidly to become one of the largest cryptocurrency exchanges in the world. 

Binance is also credited with fueling the shift towards Initial Exchange Offerings in the crypto space. Binance’s launchpad is the company native token launching platform and has proved incredibly beneficial for Binance. 

How? 

By becoming a viable replacement to the ICO model of fundraising which has suffered incredible losses due to several external factors like- ICO space becoming notorious with scams because of numerous bad actors in the space and also because of increased oversight by regulatory authorities like the SEC in the US.

ICO numbers by quarter

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ICO numbers have dropped by an astounding 72% YOY to just 285 being launched during the previous quarter (source).

Initial Exchange Offerings are quickly becoming the go-to method of fundraising as they provide investors with a relatively safe investment option than traditional ICOs. To learn about IEO’s and why they’re gaining momentum, check out our article. According to InWara’s IEO database, a total of six IEO’s have been launched on Binance’s platform and have raised a whopping $122 million between them.

With IEO’s gaining significant momentum Binance is bound to play a significant role is fueling this growth as Binance has tremendous user base, who trust the exchange.

 

If you're interested in reading about Security Token Offerings/Digital Securities, check out our highly acclaimed STO report: Security Token Offering Ecosystem.