Crypto Exchange Deribit Loses $28 Million in Hot Wallet Hack, Withdrawals Paused – BLOX

Crypto Exchange Deribit Loses $28 Million in Hot Wallet Hack, Withdrawals Paused - BLOX

Unfortunately, once in a while there is still news about stock market hacks in the crypto industry. This time it was a hit with Deribit, a platform that was originally founded in the Netherlands and that focuses on derivatives. Hackers have managed to steal $28 million worth of assets from Deribit’s hot wallet.

Recordings paused

In response to the hack, recordings have been temporarily paused on the platform. The reason for this is that Deribit first wants to check that there are no problems in other parts of the company. Furthermore, the platform says that the assets of customers are not involved in the hack, so in principle the most important funds are safe.

“It is company policy to keep 99 percent of users’ funds in cold storage to minimize the impact of these types of events. The hack is therefore isolated and limited to the hot wallets that contain Bitcoin, Ethereum and USDC,” the company said on Twitter.

A hot wallet is a wallet that resides on a device that is connected to the internet. We speak of a cold wallet if that is not the case. A cold wallet is therefore the most secure way to store your Bitcoin or other crypto.

The next in a long list

With this hack, Deribit joins a long list of crypto exchanges that have been hacked over the years. The past month was even the crowning glory in this regard, as a result of which the month of October 2022 has been unofficially renamed Hacktober. A total of $718 million in funds were stolen in October.

However, most hacks nowadays do not take place at centralized exchanges, but rather at the decentralized DeFi protocols. Often there are errors in the smart contracts, which hackers discover and then run off with the funds.

Virtually all exchanges today have similar policies to Deribit’s, keeping the vast majority of users’ funds safe at all times. That does not alter the fact that it is a bad thing that funds can still disappear in this way. Such news is not good for the industry, which still has a bit of the reputation of the digital Wild West.

Deribit not in big trouble

Fortunately for Deribit, the size of the hack is not too bad and the company does not seem to be in acute liquidity problems. It is bitter for the shareholders of the platform to lose millions of dollars in this way, but the reserves are sufficient to absorb this. “Deribit remains in a strong financial position and the continuation of the operations is not jeopardized as a result. The losses are supplemented from the company reserves,” Deribit said.

That has sometimes been different with hacks in the past. Take, for example, the hack of Mt. Gox in 2014. Hundreds of thousands of Bitcoin were stolen from what was then the largest Bitcoin exchange in the world.

The nice thing for the users of Mt. Gox is that part of that Bitcoin has now been recovered and that they will get it back in the short term. In total, 744,408 Bitcoin was lost from customers and it has lost about 100,000 of its own Bitcoin. Huge amounts that we now fortunately no longer see when it comes to hacks. In that regard, the industry has really matured compared to 2014.