Coincheck was hacked and the exchange appears to have lost over 58 billion yen ($532.60 million) worth of NEM coins. This raises questions about the security and regulations in place to protect the cryptocurrency exchanges. The exact value of the stolen NEM coins could be hard to estimate, but the value at the time of the heist could be between over $400 to $550 million as the NEM price was between $1.01 and $0.85.
The following are the main questions and answers that surround one of the largest crypto heist in History:
How was Coincheck Hacked?
The press release gave little details about the hack occurrence as the company tried to protect itself from excessive cash outflows. Coincheck’s chief operating officer Yusuke Otsuka stated that 523 million NEMS coins were moved from a NEM address at the exchange at roughly 3 a.m. local time. Eight hours later the exchange noticed that there was an abnormal decrease in their account balance leading to a great suspicion of a possible hack.
The news of the attack started on social media as the Exchange had halted most of its operations. The company admitted that the coins were stored in a “Hot wallet” instead of a secured “cold wallet”. The exchange further blamed lack technical challenges and a shortage of skilled crypto experts.
The exchange has the following message to their customers.
What is a Hot wallet?
Hot wallets are digital wallets that are connected to the internet and have a public key therefore, vulnerable to hacking. A hot wallet contains a single signature as opposed to the multiple signatures contained in a cold wallet. They are equivalent to holding money in a pocket wallet in Fiat currencies. Cold wallets are offline and can be stored in private keys.
Will Coincheck refund the stolen amounts?
Coincheck reported that it will refund the stolen NEM coins valued at roughly $533 million to its 260, 000 affected users. The company did not specify the exact criteria that it will use to issue the refund but stated that compensation for each NEM coin will be pegged at JPY 88.549.
What other coins was affected?
It appears that the only coin that was affected in the heist was the NEM coin. But, the exchange limited withdrawal of all other coins except the bitcoin from the platform as it was investigating the incident. It is important to note that the exchange got hacked and not the NEM coins. The blockchain is not vulnerable to attacks making it Internet 3.0.
The NEM Foundation is expected to give a press release on the possible action that they will be willing to take to protect and help the exchange.