Bitcoin hack explained

Synopsis

The Hong Kong-based Bitfinex exchange reveals it has fallen victim to a hacking attack, resulting in the theft of nearly 120,000 bitcoins from customer funds. This incident follows a significant drop in Bitcoin's price, which fell from approximately $650 to $600, and subsequently dropped another 20% after the announcement. The stolen bitcoins account for about 0.8% of the total bitcoins in circulation. Just a month prior, Bitfinex settled charges with the US Commodity Futures Trading Commission for illegally operating off-exchange commodity transactions and failing to properly segregate customer funds. As part of the settlement, Bitfinex agreed to modify its business model regarding customer balances and pay a civil penalty of $75,000. This situation highlights the ongoing issues within the Bitcoin financial system, which, despite claims of revolutionizing finance, continues to resemble traditional financial systems with less regulatory oversight. The hacking incident raises questions about the security of Bitfinex's multi-signature system designed to protect customer funds.