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$100 Million Stolen From Binance in Hack, Bitcoin Brushes Off the News

$100 Million Stolen From Binance in Hack, Bitcoin Brushes Off the News

DailyFX, Research

Bitcoin, BNB Coins and Binance Talking Points:

  • An October 6th hack led to the theft of 2 million BNB coins from Binance equivalent to $570 million
  • In the wake of the theft, the industry is attempting to answer the vulnerabilities

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On Thursday, October 6, a hacker stole 2mn BNB coins from Binance, the world’s largest cryptocurrency exchange. The initial total value of the BNB hack was $570mn.

Despite the scale of the theft, the broader crypto market seemed to absorb the news with limited concern. From Bitcoin (BTCUSD) the most ubiquitous cryptocurrency, the news coincided with the slide back below 20,000, but there was little deviation from normal market movement. For publicly-listed Coinbase, there seemed little carry over of investor concern.

Chart of BTCUSD (Daily)

image1.png

Chart Created on Tradingview Platform

On the tail of the exploit, Binance halted the validation of BNB, which is the coin that powers the Binance network. The cause of the hack was faulty code in a Binance ‘bridge’.

What Is A Blockchain Bridge?

Bridges allow users to send crypto across blockchain networks (which are not interoperable) in a timely and cost-efficient manner.

However, this efficiency comes at a cost. Bridges, sometimes called Layer 2’s, lack the security of core blockchain networks such as Bitcoin, Ethereum, and the BNB Chain. Human flaws, or oversights, in the smart contracts that comprise bridges, are being exploited by hackers.

This occurred on October 6th in the Binance network, when a hacker exploited a bridge that linked the BNB Beacon Chain and the BNB Smart Chain.

Though the exploit was initially estimated to be 570mn, Changpeng Zhai, the CEO of Binance, said on CNBC Friday morning that the total damage is now less than 100m.

According to Chainalysis, over $2 billion in crypto has been stolen via bridges so far in 2022. This number accounts for 69% of the total stolen crypto in 2022.

What’s Next For Binance?

Binance currently has between 26 and 44 nodes. These nodes validate all the transactions that enter the Binance blockchain. Last night, these nodes voted to upgrade the network to fix the flaw.

According to a blog post by BNB chain, the network will also employ on-chain governance to vote on numerous proposals, including:

  1. 1.What to do with the stolen money (should it be frozen?).
  2. 2.A Whitehat program, rewarding hackers for discovering flaws.
  3. 3.Whether to use a ‘burn’ to cover the remaining hacked fund.

Looking At The Charts

The BNB coin was most directly affected by the hack.

Chart of BNBUSDT with 1-Day Rate of Change (Daily)

image1.png

Chart Created on Tradingview Platform

The broader crypto market, however, held up surprisingly well on the tail of Binance’s exploit.

The below chart shows the DeFi Pulse index, which tracks the cryptocurrencies of significant DeFi protocols.

Chart of the DeFi Pulse Index to US Dollar (4 Hour0

image2.png

Chart from Coinmarketcap.com

Perhaps Binance’s low correlation to DeFi is because the Ethereum network (which dominates DeFi) is more decentralized in nature than Binance. Ethereum currently has 400,000 validators, which creates greater diversification and security than Binance’s ~26- 44 validators.

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-Written by Mike Martin, Head of Content for tastycrypto

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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