One of the biggest names in the crypto world, Binance, a global cryptocurrency trading platform, recently went through one of the most notorious hacks of the digital finance history as around 7,000 bitcoins got stolen from it. In a recent security incident update, the firm has highlighted its efforts its making to ensure this kind of an attack does not take place again and that investigation is under way to to track the stolen bitcoins.
“Many security and blockchain analytics firms are actively helping us track the stolen funds. We are also working closely with many exchanges and other service providers to freeze the stolen funds. It already is sort of an alliance. We have some ideas to contribute more on this front after we get over this incident”.
Although many experts have given their opinion regarding this hack and how it has affected the reputation of this space negatively, the center of attention of this debate, bitcoin, is silently rising up in its price ranks. At the time of writing, bitcoin is standing at around $6,923 price mark showing a mammoth 8.43% rise in the past 24 hours, despite the recent Binance hack.
Breaking its months of inactivity, the asset has seemingly stepped into a strong bullish run since the start of April. The last time bitcoin crossed $6,000 in October 2017, it rose to almost $20,000 by December of 2017. While it is only natural to assume that the hack has hurt bitcoin and cryptos’ reputation overall, and that the traders and investors must be wary of investing in this uncertain asset, the price spike is signaling a rise in the demand of the asset. So what does this contradictory behavior signify for the world’s biggest cryptocurrency?
It has been over a decade since bitcoin came on the financial scene post-2008 economic crisis. The digital asset has gone through its fair share of trouble in the form of Mt. Gox attack and others. Scams and fraudulent activities have also held their stronghold in the bitcoin world since its inception. As the focus now is more on the legislation and technological improvements, it seems that a more general layer of trust is being established around the asset.
People like Anthony Pompliano are exposing the world to the possibilities that bitcoin offers and how the banking system is not an ideal financial framework. The price spike likely signifies that despite the attack, traders and investors still hold some trust in bitcoin. Since bitcoin’s bear-to-bull flip seen at the start of April, the FOMO (fear of missing out) aura has taken a hold driving more investors into this space. In short, despite almost $41 million being wiped off from Binance, there is still trust among the crypto enthusiasts.
The “Binance Attack” has not only failed to to pull bitcoin’s price back down, it has also exposed that the blockchain space is not free of its demerits. Although blockchain frameworks are hailed as decentralized, trustless, foolproof and immutable, there are vulnerabilities and shortcomings attached to them as well. Despite the fact that the attack was carried out against Binance and not Bitcoin blockchain, Bitcoin’s security track record brings it to question as well.
Are there ways through which blockchains can be hacked? 51% attack is the most notorious one in this aspect. In simple words, if an entity or an organization is able to take hold of the 51% network maintenance of bitcoin through its hash power, since it is a peer-to-peer and decentralized network with no central control, it can manipulate the transaction record thus resulting in an overall hack. Though a 51% attack on bitcoin might just be too hard for any group, it is a certain possibility and its threat looms. Computer scientists are looking into the possibility of eliminating such attacks as this will add more credibility to this already uncertain space.
Since the beginning, cryptocurrency’s reputation in the digital media and the general public has largely been negative owing to its usage in online illegal marketplaces. The proliferation of scams has resulted in a loss of huge amounts of investor-money and as a result the general connotation around bitcoin is negative.
The Binance Attack has just added fuel to this fire. But if bitcoin wants to gain a global adoption and wants to replace the centuries-old debt-based banking system, there is a dire need of improving its reputation. This will come as a result of the elimination of illegal and negative activities happening in this space, and for that to happen proper regulation from regulatory bodies is needed. While some in the crypto space say regulation will halt the innovation in this space, others are of the view that it is something that is needed for the greater good. Protection of investors from frauds and scams is of utmost priority and if that doesn’t happen, cryptos’ reputation will further suffer.
Another important question is institutional investment. Financial institutions and banks have largely stayed away from bitcoin as the asset has no physical backing. Its price is highly certain besides being prone to manipulation by big whales and it has also been used in illegal activities. For institutions, the bigger question associated with bitcoin is not its price, but rather its credibility and security aspects.
Legalization of cryptos and devising specific rules and regulations to make investments safe and solving the issues of custody, liquidity, volatility and price manipulation will put bitcoin in the good books of the institutions. These are exactly the reforms that are also demanded by the global financial world. If bitcoin wants the status of a global digital currency, it’s better for it to act like it. So from the institutions’ point of view, it’s the official acceptance at the government level that matters more than anything else.
From this inflection point of the Binance Attack, bitcoin may have laid out its possible ending. If these attacks persist and bitcoin’s reputation further drives itself to new lows in the financial world, that may just be it for bitcoin. Big business gurus like Warren Buffett are already not very supportive of bitcoin and acts like this attack further darken its future. But if the crypto space takes some lessons from these attacks and works towards building a concrete legislative framework aimed at solving the regulatory discrepancies and improving the underlying technology, bitcoin might just get the adoption that it needs among the public, along with its price climbing to even a million dollars as predicted by John McAfee.