It’s happened again, folks. Another innocent, unsuspecting cryptocurrency exchange has fallen victim to hackers and lost millions in digital funds. This time, the target was Ku Coin in Singapore, one of Asia’s most popular crypto trading platforms, and the total taken exceeds $150 million.
Ku Coin Was Hit Hard
The exchange made the following announcement on its website:
We detected some large withdrawals since September 26, 2020. According to the latest internal security audit report, part of bitcoin, ERC-20 and other tokens in Ku Coin’s hot wallets were transferred out of the exchange, which contained few parts of our total asset holdings. The assets in our cold wallets are safe and unharmed, and hot wallets have been redeployed. We are locating the reason for the incident and will keep you updated once it is confirmed. Please rest assured that if any user fund is affected by this incident, it will be completely covered by Ku Coin and our insurance fund.
The situation presents two interesting facts. The first is that Ku Coin offers insurance to its users and looks to keep all digital assets safe under a specific insurance plan. This is rare for most exchanges, which typically do not offer this kind of coverage considering the cryptocurrency space tends to be very up and down and volatile and doing so typically goes against the decentralized nature of the arena.
The fact that Ku Coin offers such insurance is a powerful thing and suggests that the exchange is big and popular enough to take such steps. However, the statement clearly shows that the company still employs hot wallet technology to store various cryptocurrencies, which is something that has typically come back to haunt exchanges.
Remember Coincheck? Sure, you do. It’s the largest cryptocurrency exchange hack in the history of cryptocurrency. The platform also employed hot wallet technology and as a result, lost more than half-a-billion in crypto funds to hackers. We have said it before, and we will say it again. Hot wallets do not work. They are old technology that do not protect funds the way they should, and they should not be utilized any more. The year is 2020. When is the technology going to catch up to the times?
Keeping Things Together
The statement on the company’s website continued with the following verbiage:
To ensure the security of users’ assets, we will conduct a thorough security review. The deposit and withdrawal service will be suspended during the period. We will restore the service gradually after ensuring a safe state. We will keep you updated. As ‘The People’s Exchange,’ we will take full responsibility and maintain transparency. To keep you updated regarding the latest updates, our CEO Johnny Lyu will update more details through a livestream at 12:30 September 26, 2020. Please submit your questions if you have any. We greatly appreciate your understanding and support.