Bitcoin’s blockchain is often touted as a revolutionary step forward for network security. But August 2016 theft of nearly $68 million of customers’ bitcoins from a Hong-Kong-based exchange demonstrated that the currency is still a big risk.
But massive bitcoin US:BTCUSD security breaches like the one at Bitfinex and the attack that bankrupted Mt. Gox in February 2014 highlight the need for the cryptocurrency community to find a compromise that would allow the so-called blockchain to be more flexible so victims of theft can recover digital currency that has been spirited away by hackers.
The blockchain is the universal record of all bitcoin transactions. Each computer running the bitcoin software keeps a copy of the ledger encoded in its system. And every time a group of transactions are processed by bitcoin’s global network, they must be checked against each computer’s stored copy of the blockchain.
This digital ledger is both one of the biggest assets of bitcoin-like currencies and one their biggest liabilities. Because once a piece of information has been added to the blockchain, it can’t be altered, and that makes it difficult to remedy thefts.
The security flaws that make these hacks possible aren’t inherent; instead, hackers exploit specific security flaws at cryptocurrency exchanges. Although Bitfinix has not released any details on how it was hacked, this hack shows how hackers exploit Bitcoins underlying infrastructure to hack it.
Source: http://www.marketwatch.com/story/bitfinex-hack-shows-how-bitcoins-blockchain-can-be-a-liability-2016-08-03