What the Coincheck Hack means for the Future of Blockchain Security
Blockchain security is entering the mainstream discussion these days. It’s not surprising since cryptocurrencies are seemingly poised to enter the mainstream quite soon. It appears that even Amazon may start not just accepting cryptocurrencies, but even become a large exchange.
Speaking of exchanges, the Japanese exchange Coin-check was recently hacked, and this is two steps back for the trust that the cryptocurrency industry was slowly gaining. There had been the perception that cryptocurrency is highly secure, and even mobile casinos, top bingo sites have become open to it. But does the theft of over $500 million of digital coins from Coincheck mean the digital coins are easy prey for hackers?
Coincheck Didn’t Store Funds Offline
The hacking reminds of the blockchain and the anonymity and convenience it can offer. That digital coins are still emerging. Security measures, rules, norms, etc. are still being framed. The hack on Coincheck was inevitable, particularly because the exchange had felt it was not vulnerable. It had omitted to put in place some basic security steps. Funds should be kept offline, but instead, the stolen coins were stored in a wallet connected to the internet. This is the first step in security that coin exchanges should know about. This is a lesson learnt for clients as well. Even when you’re paying with digital coins in the future, make sure that they keep their funds offline, in cold storages.
What About the Private Key?
Another question raised by the hack is about the private keys that are associated with every public digital coin’s address. Money can’t be moved from the ‘wallet’ or address without this private key. If someone gains access to the private key, as they did in the Coin check hack, they can transfer the money out of the address.
The question is, how can the private key be made more secure? Security experts say that the answer lies in the multi-signature address. In other words, an address that needs more than one key for money to move. A simple example of how this could work is that partners could create a wallet that can only be used for transactions after every partner signs off. This system is not foolproof – such an account with Bitfinex was hacked in the past. But it will deter thieves. There may also have been something wrong with how the multisign account was implemented in Bitfinex.
Things to Think About
Digital currencies will soon be here to stay. It is important to start thinking about blockchain security. Some people say the blockchain will be great not only for tracking money but other assets like land titles as well. The security of your funds will always be important in every transaction you make. Even though Amazon may become a huge exchange for cryptocurrencies, some best practices will have to be adopted by businesses who deal with digital currencies to minimize associated risks. Th Coin check fiasco was a good wake up call to get the issue the attention it needs.