Restoring Trust in Crypto and Government Institutions
Governments and crypto institutions don’t get along most of the time. Due to the nature of both systems in a perfect world, they will never need each other. Bitfinex managed to restore trust as the US law enforcement aided in the recovery of 27.66270285 bitcoins.
The bitcoins received by the government were only a piece of the stolen funds back in 2016. After the security breach was found out, Bitfinex asked many enforcement agencies for help.
They launched a global investigation to track the 119 756 BTC which were stolen from the exchange. Amazingly enough, the reality seems to match a Hollywood movie as the government agencies actually did their job.
It gives us great pleasure to report we have received bitcoins from the U.S. government that were proceeds of the 2016 security breach. In line with our original recovery plan, this is being converted to USD and paid to RRT holders.
Find out more here – https://t.co/UwCMNERes9
— Bitfinex (@bitfinex) February 25, 2019
Because of the huge number of bitcoins which were stolen, Bitfinex immediately generalized the losses from every account and credited a token pegged to the US dollar. The token was dubbed BFX and was used to pay for the damage each customer suffered.
Bitfinex presented its customers with two very simple and reliable options. They could either redeem the tokens for cash or exchange them for shares of iFInex Inc. Most people chose to cash out immediately, while a seemingly small percentage chose to get the shares of the company which operates Bitfinex.
The process was long and all the BFX tokens were destroyed in the process. Those who chose to gain shares of iFinex, were given Recovery Right Tokens (RRT). These RRT tokens represent every single individual’s respective amount in iFinex’s shares.
To restore trust in crypto institutions after the last few years will be challenge
Bitfinex was noticed by United States authorities about the retrieved funds a few months ago. The exchange is now working on converting the 27.7 BTC in USD and will distribute them accordingly across the RRT holders.
Bitfinex’s CFO Giancarlo Devasini, praised the United States government and reached out to anyone willing to listen:
“We will keep assisting law enforcement with their inquiries. Additionally, we still give an open invitation to the attackers or anyone who possesses information about the security breach. Make contact in whichever medium you feel comfortable with and help us to finally resolve the situation in a mutually beneficial manner.”
Attacks on crypto exchanges and security breaches in general have been the main reason for low crypto confidence. A decade has passed after bitcoin launched and issues like these are still frequent. Of course, the recovered BTC represents only 0.023% of the total losses but it’s a small step in the right direction. There needs to be many more in order to restore trust in crypto institutions.
Attackers usually are one step ahead of the law when it comes to exploiting the vulnerabilities of centralized institutions. For now, decentralized exchanges like Binance are using cold wallets as a way to mitigate hacking potential but this will not solve the problem in the long run. All crypto trades must have 24/7 access to their funds, which means storing in an exchange is essential.
Improved security will open the doors of mass adoption. When cryptocurrencies inevitably go mainstream, issues like this must be a thing of the past. To restore trust further, all eyes are on the governments.
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