Bitmart, a Cayman Islands-based exchange, reported on Twitter about a major breach to two of its wallets. A hacker had managed to get hold of the private keys for the wallets and made quick work to empty them.
Hot wallets – a term used to define such wallets, like metamask, which are web-hosted – are commonly used in cryptocurrency due to the ease of access and use. These wallets are semi-secure but ultimately leave digital assets unsecured if someone was to access a device.
Using a hardware wallet is much more secure because there is an additional layer of protection against the use of a private key. Many cryptocurrency exchanges use a combination of hot wallets and cold wallets to improve the speed of transactions, deposits and withdrawals.
Bitmart initially reported the incident as a loss of $150m, but the company Peckshield, which identified the hack, stated the loss was closer to $200m. The hacker used decentralized exchanges to trade the funds into other tokens and then used an application called Tornado Cash which obfuscates transactions. It is almost impossible to track these funds once they use an application like Tornado Cash.
Bitmart was quick to respond to the incident and claim they would cover the losses. Bitmart stated that these wallets were only a small percentage of its holdings and no user would lose funds over this. While it sounds positive for the exchange, many crypto enthusiasts still worry about a few issues.
The first major issue of concern is how the hack happened. Bitmart has said it will soon launch a full investigation. As the company currently does not know how the hacker was able to gain access, with the exchange still running, this may still pose a threat.
The second issue is liquidity. Other exchanges have experienced similar hacks and in the coming weeks, it was clear to users that it was suffering from a lack of liquidity. This could stop users from being able to withdraw their funds while they find a way to cover this loss.
As always, it is much safer to keep funds in your own wallet, with your own keys. We always recommend having a hardware wallet to keep your assets safe and out of the hands of hackers.