$2 500 000 USD

MAY 2016

HONG KONG

GATECOIN

DESCRIPTION OF EVENTS

"News emerged last week of yet another security event in the digital currency exchange ecosystem, this time impacting a Hong Kong-based service involved in the sale of assets related to Ethereum-based decentralized autonomous organizations (DAOs). As reported on Friday, Gatecoin experienced a cyberattack on its hot wallets that resulted in the loss of funds. A new update from the exchange team indicated that as much as $2m was lost, confirming rumors that circulated soon after the hack became apparent."

Gatecoin was one of the first regulated digital asset exchanges. This didn’t stop the hack of 185,000 ETH and 250 BTC. According to a forensic analysis, the exchange may have been the victim of a man-in-the-middle attack. The malicious external party involved in this breach managed to alter their system so that BTC and ETH deposit transfers bypassed the multisig cold storage and went directly to the hacker’s hot wallet during the breach period. The company fired their CTO, managed to raise $500k in order to reopen, and ultimately repaid all customers. They were saved by maintaining large cold wallet reserves which appear to have been properly stored, and appear to have dealt with the issue transparently. Having hot wallet insurance would have further assisted with the recovery; however a system like Proof of Reserves or an automated alert system could have allowed the issue to be noted sooner.

Sources And Further Reading

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