Yesterday, US$31million in cryptocurrency was stolen by hackers from Bithumb, a South-Korean cryptocurrency exchange.

Just days before the hack took place, Bithumb conducted a security enhancement check as well as moved users’ assets to a cold wallet to secure the digital coins in a more secure offline environment.

Millions of cryptocurrency users store their digital coins in third-party wallets. This hack goes to show how important it is to store coins in a wallet that’s fully controlled.

Third-party wallets

“A well-thought-out cybersecurity strategy will likely cost much less than the losses caused by these consecutive incidents. Users who entrust their digital coins to third parties should be prepared to never see them again, this is the reality of modern Bitcoin Klondike,” commented Ilia Kolochenko, CEO and founder of web security company High-Tech Bridge.

Following this, the cryptocurrency market appears to have taken the hack into consideration, with Bitcoin prices and total market cap decreasing by more than 2% within 30 minutes of the hack being announced.

Security landscape of cryptocurrency

“Billions of dollars in digital currencies have been stolen in the last twelve months according to various reports. Thus, this particular [minor] incident will unlikely alter the grim security landscape of cryptocurrency exchanges,” Kolochenko added.

Bithumb confirmed the hack on its website and official Twitter account an hour before reporting the case to the Korea Internet & Security Agency (KISA), a government organisation that supervises internet and cybersecurity issues in the country, as well as notified all of its victims that it will be paying back the tokens as soon as possible.

“It is very good to know that the victims will be duly compensated after the breach, although this raises the question of economical practicality to operate a crypto-exchange business in such a manner,” noted Kolochenko.

Written by Leah Alger