Chris Forrester, chief technology officer with Shyft Network Inc., explains what’s happening with cryptocurrency exchanges, bitcoin and the security of blockchain for non-financial purposes.
A recent report from Glassnode found that the amount of bitcoin being held in cryptocurrency exchanges was at its lowest point in months. But Forrester says that’s not a matter of declining trust in the currency itself — just a decision by crypto holders to rely more on decentralized exchanges. Investors still perceive some risk of a large exchange going down, wiping out their assets. One relatively recent example was the 2019 collapse of Quadriga CX, a cryptocurrency trading platform based in Canada, whose primary keyholder was accused of conducting a Ponzi scheme. Such occurrences “still do impact whether or not individuals feel safe keeping their assets on an exchange that’s centrally managed, versus one where they can have the keys in their own hands,” Forrester said.
Blockchain has been subject to theft as well. According to data analyzed by Atlas VPN, hackers have stolen $13.6 billion through 330 hack events this year to date. There were 87 successful attacks against cryptocurrency exchanges, resulting in a combined loss of $4.82 billion. So much for the claim that a blockchain in unhackable, and its distributed ledger completely secured against tampering. “There’s definitely still a large problem in how companies are dealing with their key ownership,” says Forrester. The problem has been somewhat alleviated over the past couple of years, with some digital exchanges offering more secure custodianship of data, backed by insurance for smart contracts. But even the decentralized exchanges are vulnerable to huge hacks.
Blockchains that are created solely for aggregating data are less threatened by hacking. “However, as soon as you connect it to a transactional blockchain, you get those same issues all over again,” says Forrester.
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