Binance became the latest blockchain to suffer the slew of cryptocurrency hacks in 2022 on October 7th, 2022 when a hacker was able to siphon almost $600 million from the blockchain. Luckily Binance was able to step in sooner rather than later to minimize the affect on the users of the platform, but the thief was still able to get away with over $100 million dollars in cryptocurrency.
How did this happen? And why do these cryptocurrency hacks keep happening? Is there anything that can be done? Read on to find out.
What Was the Binance Hack?
The Binance hack, like many other cryptocurrency hacks that occurred in 2022, was a result of a cross chain weakness. The hacker in question was able to perform the hack by tricking BSC Token Hub, a bridge used to connect two or more blockchains, to send the equivalent of $586 million in BNB (Binance Coin).
Basically, there was a bug on the BSC Token Hub which allowed the hacker to mint these BNB tokens out of thin air. Binance has 26 validators in their system, and perhaps if they had more, they would have seen the hack sooner. Either way, some of these validators did notice the irregular activity and notified Binance. As a result, Binance was able to stop the majority of the hack from going through and recoup many of the falsely minted coins.
While the hacker was able to get away with about $100 million in tokens, Binance was able to freeze about $7 million, no more because the hacker had transferred the rest to other blockchains and cryptocurrencies before they were able to act. The CEO of Binance, Changpeng Zhao has gone public to urge users not to panic and let them know that their cryptocurrency is still safe on the Binance platform.
But seeing as this is the second hack suffered by the company (since the 2019 hack for $40 million involving Bitcoin) many Binance users aren’t so sure anymore about the security of Binance anymore.
Why Did the Binance Hack Occur?
While Binance itself takes pride in their security procedures, in the expanding DEFI world there has become an increasing need to move tokens from blockchain to blockchain. As a result many “bridges” have been built to connect various platforms and blockchains. These bridges are helpful, but because they can be built by anyone (as is common in the DEFI world) they aren’t always safe.
Think of it a bit like bridges in the real world. Imagine the earth was separated into several vast, but close islands, and you wanted to get from one to the other. Since this imaginary earth is in DEFI land, there is no government to collect taxes and see to the building of bridges. Instead, it is up to the citizens to build their own bridges to the other islands.
While some citizens may be great bridge builders, others may not be, leaving holes that you could possible fall through. Criminals can exploit these holes (or build secret tunnels) in order to steal money from one island to the next. This causes the money of everyday citizens to go missing, all because of the faulty bridges.
Unfortunately, this creates many less than ideal situations, just as it does in the current world with cryptocurrency hacks. Because most of the current cryptocurrency projects are decentralized, there is no one making sure that all the holes in bridges and secret tunnels are filled. Therefore hackers are able to exploit these holes and get away with millions.
This particular hack occurred because of a bug or fault of the BSC Token Hub, and while not totally the fault of Binance blockchain, they will likely take most of the fall as they allowed the bridge to work with their blockchain and ultimately it was their token, BNB which was falsely minted.
How to Stop Future Cryptocurrency Hacks
It seems like each and every week there is another hack in the cryptocurrency world and beneath them all it comes down to the same thing, a bug or flaw in the system that criminals were able to take advantage of.
Thus, the only way to stop future hacks is by increasing security on blockchains which can be done in many ways. Binance CEO announced that going forward, Binance plans to have more validators on their system. While this won’t stop hacks entirely, it can help to get them noticed faster and minimize the damage that can be done.
Besides just adding validators, more audits, better programing, and bug bounty systems can all help make DEFI a safer place. But while platforms like Binance care for their customers, there are many out there that don’t, or they are too underfunded to do the proper testing, and that is why these hacks keep occurring.
As cryptocurrency continues to expand and get more popular, more funding will be available to prevent these hacks from happening. But in the meantime, these hacks are a part of the unfortunate growing pains of a new industry.
Before you panic and decide never to trade on a cryptocurrency platform again, know that there are many amazing DEFI products out there, you simply need to take the time to investigate the one you plan to use. You also need to take the time to investigate any currency you put your money into as these too can be filled with scams.
As long as you do your research, and store your coins in a cold wallet, it is likely that you can avoid scams in the cryptocurrency world. And the more you know about cryptocurrency scams and stay informed, the more likely you are to be able to keep you investment safe.
Remember that above all else, if it sounds to good to be true, it probably is, and if you are ever not paying for a service (and you can’t figure out who is) then you are the product.