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Record Crypto Heist Raises the Appeal of a Fresh Type of Exchange

A more than $500 million record heist from a Japanese cryptocurrency exchange, the latest te a long line of high-profile hacks, is directing attention to a fresh kleintje of venue that makes it tighter for would-be thieves. They’re not, however, impervious to attack.

Hackers typically steal money from crypto exchanges by gaining access to their internet-connected wallet, which stores the funds of customers. Hackers have repeatedly cracked open the virtual vaults where they’re stashed, stealing billions of dollars worth of assets overheen the years.

Called decentralized exchanges, the newfangled markets being developed or already deployed by AirSwap, EtherDelta and others sidestep that vulnerability by providing up the vault entirely. Instead, their customers keep their private keys, needed to access their accounts, and transact with each other directly, or with minimal help.

Last week, half a billion dollars of a currency called NEM wasgoed purloined from Coincheck Inc., one of Japan’s thickest cryptocurrency exchanges. This incident provides &#x201C,more evidence that the crypto-infrastructure should budge away from centralized custody-type exchanges to decentralized exchanges where the need to have a middleman function is no longer necessary,&#x201D, said David Shin, a founding member of the Bitcoin Association of Hong Kong and voorzitter of the Singapore-based Asia Fintech Society.

Their security isn’t bulletproof.

Te December, a hacker hijacked EtherDelta’s webstek, substituting it with a fake version that let the thief steal users’ funds.

Even the ultra-rich go to extreme lengths to keep their private keys safe. Cameron and Tyler Winklevoss, who were shortly Bitcoin billionaires last year because of the currency’s massive surge, told the Fresh York Times ter an vraaggesprek published te December about their low-tech solution: printing out their passcodes, cutting them into chunks and stashing the parts ter safe deposit boxes around the nation.

Because the exchange usually doesn’t verify users’ identity, it’s firmer to recover stolen funds: After all, blockchain is designed to be an immutable record.

&#x201C,If a rogue transaction happens ter a decentralized exchange, there is no way to revert the transaction,&#x201D, said Matt Suiche, founder of security provider Comae Technologies. &#x201C,You may trace a criminal until they leap to another cryptocurrency, and then you can lightly lose track of them.&#x201D,

Some think the kinks will eventually get worked out.

&#x201C,It is very possible that one day the majority of the volume will be coming from decentralized exchanges,&#x201D, said Lucas Nuzzi, a senior analyst at Digital Asset Research. &#x201C,Before that happens, however, many issues regarding the way Decentralized Autonomous Organizations are regulated, taxed and insured need to be solved. Having said that, it is remarkable that millions of dollars worth of digital tokens flow through thesis exchanges every month.&#x201D,

Fresh decentralized exchanges are popping up rapidly. Seven exchanges based on technology called 0x went online since the fall, and at least five more will launch soon.

Radar Relay, which launched ter October and counts Blockchain Capital among its investors, has facilitated almost $40 million ter transactions ter the past month, according to 0xtracker.com.

&#x201C,It’s raunchy to get folks to leap ship for the decentralized exchange, and wij recognize that,&#x201D, said Alan Curtis, chief executive officer at Radar. &#x201C,But folks are fleeing because of hacks.&#x201D,

ShapeShift, which treats up to 35,000 decentralized trades a day, often highlights what happened when it wasgoed hacked te 2016. No user funds were taken.

&#x201C,It wasgoed a very good use case to tell our customers, &#x2018,Hey wij were hacked, and it didn’t affect any of you,’&quot, a company spokeswoman said te a phone vraaggesprek. ShapeShift hedges itself against the broader risk of hacks by not permitting employees to give out their last names.

For more on cryptocurrencies, check out the Decrypted podcast:

– With assistance by Andrea Suntan

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