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Coincheck and NEM working together to mitigate the biggest cryptocurrency heist

Feb 02, 2018 Posted /  45862 Views

Coincheck and NEM working together to mitigate the biggest cryptocurrency heist

When on January 26, a Japanese firm Coincheck was infiltrated with the biggest cryptocurrency heist in the history of virtual currencies, it lost somewhat $534mln of XEM, the native cryptocurrency of NEM.  However, NEM and Coincheck are both working hard to alleviate a little from the damage caused by the hacks. Both the firms are also exploring all possible solutions that security breaches would not happen in future.

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The speed at which both the firms have responded is very great in comparison to the high profile hacks in the past. Tokoyo based Mt. Gox, which handled 80% of the world's Bitcoin trades filed for bankruptcy after losing 850,000 Bitcoins which were worth roughly $450 mln in 2014. Earlier in January too, the South Korean exchange Youbit also filed for bankruptcy after being hacked twice in 2017.

We can also say that previous hacks were smaller in comparison to this one. The Japanese heist has caused more damage to the economy solely for the fact that the theft amount to a significant portion of cryptocurrency in circulation.

Additionally, while this recent robbery is still under investigation, there is still a chance the XEM may be retrieved.

How to avoid the hacks?

As by now, many analysts are evaluating the gravity of damage and Jeff McDonald, Vice President of the NEM Foundation have scrutinized Coincheck's situation carefully and speaks about how similar situations can be circumvented in the future. He admitted NEM was already working with Coincheck before the media picked up the story. The exchange called his team for help and advice as soon as the breach was discovered.

“Due to the nature of NEM’s architecture and its advanced API, we were able to devise a rapidly executed plan that succeeded in giving us a full account of all the stolen XEM," he said. "But for obvious reasons, we can not disclose at this time the exact method of the attack.”

He elaborated how easy it was to detail what is happening on the blockchain within minutes. Polyswarm CEO Steve Bassi also weighed in on the Coincheck exchange hack: “Exchanges are complex software marketplaces, sometimes integrating hardware as well, and security is an enormous task.”

Polyswarm is a decentralized cyber threat detection platform that is studying confidentiality controls in a blockchain environment, commissioned by the U.S. Department of Homeland Security. Bassi explained that third-party audits would be a great asset for any exchange. They should come from multiple parties and incorporate both physical and software components.  He says that in order to obtain best results, the technical staff at the exchange should not be told about it so that audits can happen randomly and there are no manipulations in the results.

Restricting the amount in 'hot wallets'

Many experts so far have analyzed that the major reason there is high number of hacks currently, is the use of a hot wallet, a digital wallet connected to the Internet where bitcoin-related services and exchanges can be paid out or withdrawn almost immediately. One defence that may facilitate exchanges and avert future hacks would be to limit the amount that can be contained in a hot wallet at any specific time.

There are questions arising in the crypto-community if NEM would go through hard fork to render the tokens to the owners who have lost in the hack. McDonald explained that NEM wasn’t guilty of the hack:

“We have identified 10 different accounts the tokens went into. We tagged all the coins so anyone who attempts to purchase them will know they were stolen from Coincheck and should not be purchased. We also have other strategies that we cannot disclose fully at this time. But it does involve an automated system that will follow the coins and tag any accounts that receive the coins.”

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Tags: coincheck cryptocurrency NEM

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