$100 million stolen from Binance in Hack, Bitcoin brushes off the news

Bitcoin, BNB Coins and Binance Talking Points:

• An October 6 hack led to the theft of 2 million BNB coins from Binance equivalent to $570 million
• In the wake of the theft, the industry is trying to respond to the vulnerabilities

On Thursday, October 6, a hacker stole 2 million BNB coins from Binance, the world’s largest cryptocurrency exchange. The original total value of the BNB hack was $570 million.

Despite the scale of the theft, the broader crypto market appeared to absorb the news with limited concern. From Bitcoin (BTCUSD), the most ubiquitous cryptocurrency, the news coincided with the slide back below 20,000, but there was little deviation from normal market movement. For publicly traded Coinbase, there seemed little transfer of investor concern.

BTCUSD Chart (Daily)

Diagram Created it Tradingview platform

On the tail of the exploit, Binance stopped validating BNB, which is the coin that powers the Binance network. The reason for the hack was faulty code in a Binance ‘bridge’.

What is a blockchain bridge?

Bridges allow users to send crypto across blockchain networks (which are not interoperable) in a timely and cost-effective manner.

However, this efficiency comes at a cost. Bridges, sometimes called Layer 2s, lack the security of central blockchain networks such as Bitcoin, Ethereum, and the BNB chain. Human errors, or oversights, in the smart contracts that comprise bridges are exploited by hackers.

This happened on October 6 in the Binance network, when a hacker exploited a bridge connecting the BNB Beacon Chain and the BNB Smart Chain.

Although the exploit was initially estimated at 570 million, Binance CEO Changpeng Zhai said on CNBC on Friday morning that the total damage is now less than 100 million.

According to Chainalysis, over $2 billion in crypto has been stolen via bridges so far in 2022. This figure represents 69% of the total crypto stolen in 2022.

What’s next for Binance?

Binance currently has between 26 and 44 nodes. These nodes validate all the transactions entering the Binance blockchain. Last night these nodes voted to upgrade the network to fix the bug.

According to a blog post from the BNB chain, the network will also use on-chain governance to vote on a number of proposals, including:

1. 1. What should be done with the stolen money (should it be frozen?).
2. 2.A Whitehat program that rewards hackers for discovering bugs.
3. 3. Whether to use a “burn” to cover the remaining hacked fund.

Looking at the lists

The BNB coin was most directly affected by the hack.

Chart of BNBUSDT with 1-day rate of change (daily)

Diagram Created it Tradingview platform

However, the broader crypto market held up surprisingly well on the tail of Binance’s exploit.

The chart below shows the DeFi Pulse Index, which tracks the cryptocurrencies of significant DeFi protocols.

Chart of DeFi Pulse Index to US Dollar (4 hours0

Chart from Coinmarketcap.com

Perhaps Binance’s low correlation to DeFi is because the Ethereum network (which dominates DeFi) is more decentralized than Binance. Ethereum currently has 400,000 validators, creating greater diversification and security than Binance’s ~26-44 validators.

-Written by Mike Martin, Head of Content for tastycrypto