- The world’s largest crypto exchange, Binance, had to suspend deposits and withdrawals due to a hack.
- BNB is the fifth largest crypto by market cap, and the hack was for 2 million BNB tokens, which resulted in $570 million.
- A hacker exploited a vulnerability in the BNB network, which is concerning news for the entire crypto space.
There was another major hack in the crypto space as the world’s largest crypto exchange by trading volume had a major issue on the network. Hackers drained (created, actually) 2 million BNB, the native token of the Binance network, out of thin air due to a vulnerability that resulted in the hack of an estimated $570 million.
It has been a turbulent year for cryptocurrency, with many high profile coins dropping 70+ percent of value since the start of 2022. As we assess the latest crypto scandal in a series of hacks, thefts and frauds, let’s unpack this BNB hack and figure out what it means for the cryptocurrency space.
What happened with the BNB hack?
The Binance coin (BNB) is the cryptocurrency coin that powers the BNB Chain ecosystem, and it’s the official exchange token of the Binance crypto exchange. The token was originally launched on the Ethereum blockchain and then moved to the Binance Smart Chain, now known as BNB Chain. The BNB Chain comprises BNB Beacon Chain and BNB Smart Chain (BSC).
It was first reported that $100 million was hacked, and then the number went up drastically. About 2 million tokens of BNB (worth about $570 million) were withdrawn. The Binance co-founder and CEO Changpeng Zhao (“CZ”) announced that the hack happened on a cross-chain bridge where users transfer digital assets from one blockchain to another. The hackers were able to create 2 million BNB tokens out of thin air. The attacker was able to exploit a vulnerability in the Binance Bridge, and they sent themselves one million BNB tokens twice in a row. The hack happened because of a bug in the smart contract where hackers could forge transactions and transfer funds into their wallets.
The Binance CEO tweeted that the current impact was estimated to be worth about $100 million because a majority of the stolen tokens couldn’t be transferred off the BNB chain. All validators were asked to temporarily suspend BSC, and this helped to contain the issue. BSC confirmed that it arranged a shutdown of the entire blockchain once they spotted the issue and validators acted quickly. The BNB Chain has a total of 44 different validators, with 26 of them being active at the moment. The validators are responsible for confirming transactions on the blockchain.
The Binance CEO tweeted on October 6:
“An exploit on a cross-chain bridge, BSC Token Hub, resulted in extra BNB. We have asked all validators to temporarily suspend BSC. The issue is contained now. Your funds are safe. We apologize for the inconvenience and will provide further updates accordingly.”
He then went on CNBC on October 7th to further explain the situation and to assure BNB holders that their funds were safe.
What Happened to BNB?
The price of BNB dropped slightly on Friday after the hack on Thursday evening. The good news is that the entire blockchain didn’t collapse as the issue was contained and handled almost immediately since the blockchain was turned off with the validators working together promptly. BNB holders also didn’t lose $570 million collectively, as the media headlines may have been confusing.
It was then reported that the hacker only made off with about $110 million instead of $570 million. The blockchain was also able to freeze another $7 million due to the help of the security partners. The Binance Smart Chain community will now hold a vote to determine the next steps. There’s a consideration for freezing the stolen funds and setting a bounty for catching the perpetrators of this hack.
On the morning of October 9, the BNB coin, the fifth largest crypto by market cap, was at the price of $278.14, down about 46.34% for 2022.
It’s also worth noting that the overall cryptocurrency market experienced a drop due to the released labor data. Many crypto proponents originally touted how the digital asset would be independent of overall economic issues, but this hasn’t been the case, as we’ve seen crypto prices drop alongside major economic announcements such as rate hikes that impact the stock market.
What does this mean for Crypto?
It appears that this BNB hack was an isolated incident, and there were no other hacks in the crypto space at this time. This is seemingly a case of unorganized crime, something more opportunistic, if no less serious. The attacker was able to exploit a vulnerability in the BNB network due to a cross-chain bridge, and no other coins were impacted. However, many crypto experts (including Vitalik Buterin, a founder of Ethereum) are skeptical of cross-chain bridges due to safety issues.
In the decentralized finance (DeFi) space, transactions are controlled by code, and the mechanism appears to have many weaknesses. If these security limitations are resolved promptly, then there’s a chance that this hack could inspire others to test for similar vulnerabilities in the future.
The unfortunate news is that this hack only adds fuel to the uncertainty in the crypto space that has alarmed many investors. There are many barriers to entry when it comes to the mass adoption of crypto, and this will certainly have many doubtful about switching to digital currency.
What are other crypto issues worth knowing about?
It has been an extremely turbulent year in cryptocurrency, with many of the main coins dropping up to 80% in value since 2022 started. There have also been some major hacks and disasters that we have to touch upon. It’s estimated that about $2 trillion in value has been erased from the crypto ecosystem since the rallies of 2020 and 2021 that sent token prices soaring.
The luna collapse led to an estimated $60 billion being wiped out of the crypto ecosystem. That sent shockwaves throughout the entire crypto space as it became clear that even a stablecoin like USDT could be depegged with many people losing their life savings.
Chainalasys confirmed in August that about $2 billion worth of crypto had been lost due to cross-chain bridges. This theft has happened over 13 different cross-chain bridge hacks. It’s estimated that 69% of stolen funds in 2022 have happened due to attacks on bridges. The report also mentions the troubling news that hackers linked to North Korea have already stolen about $1 billion worth of crypto this year.
We also can’t forget the issue with Kim Kardashian and the SEC where she was fined $1.26 for not disclosing that she was receiving financial compensation for promoting EthereumMax on her Instagram page. All of this news is just more negative publicity for the crypto space, where there are rumors circling of regulations to come. And soon, due to all of these issues that cost users money.
How should you be investing?
While we understand the benefit of investing in digital assets because some experts believe this online currency is the way of the future, there are still many serious risks involved with putting your money into this space. We can’t deny that there have been colossal losses in this space this year. We don’t want to see you lose your hard-earned money.
For now, serious investors are willing to wait out this rounding up of the wild west of crypto and its obvious imperfections, because they are bullish over the long haul.
If you’re looking to invest in the cryptocurrency space, you may want to consider an investment kit like our Crypto Kit or Emerging Tech Kit. These kits help spread risk across industries, not just investing in a single coin or company but the entire ecosystem to hedge. They both use AI to allocate portfolio weights each week across four vertices: crypto, tech ETFs, large tech companies and small tech companies. Users can also activate Portfolio Protection at any time to protect your gains and reduce your losses, no matter what industry you invest in.
The major risk you take with investing in digital assets is that the space isn’t regulated, which can lead to hackers trying to exploit this space. With crypto prices plummeting in 2022, it doesn’t seem like recovery is imminent. We encourage you to due your own extensive research before investing your money into risky assets because you don’t want to lose everything that you’ve worked for.
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