The BitGrail Hack Might Be More Than Just Another Cryptocurrency Heist

Cryptocurrency has remained a volatile emerging industry for some time now, becoming a source of public fascination particularly over the course of the last sixteen months. In that time, breathless coverage and constant suspicion have plagued the industry, though many find skepticism to be beside the point: anything new and revolutionary is going to be fundamentally risky, seemingly unbelievable, and challenged at every turn. Yet aside from what some may see as an unwarranted constant concern, cryptocurrency has nevertheless been hacked multiple times in the last few months. Now the crypto bubble is facing another high-profile hack, except this time the details are still stuck in a perennial shade of gray.    

Missing Coins

Italian cryptocurrency exchange format, BitGrail, announced last week that at the time of closing on Thursday, the exchange company was missing 17 million Nano. At the time of the hack, Nano was worth $11.90, making the total value of missing coins over $202 million. Since the hack, the price of Nano has dropped by over two dollars, down to $9.57 according to CointMarketCap.
The initial reaction was to consider this latest crypto hack as one in a long line of attempts to game a system still in its infancy. In January, Coincheck, the Japanese cryptocurrency exchange system, had $424 million worth of NEM coins—a type of crypto—stolen from its reserves. This is more than double what was stolen from BitGrail, yet the implications of this most recent hack are seemingly prompting more questions than they’re answering, chief of which is where to place the blame: the security procedures of companies like BitGrail, or on the hack-ability of certain cryptocurrency like Nano.  

Passing the Buck

Just one day after BitGrail announced the hack, the team behind the Nano currency released their own announcement, claiming that they were contacted by Francesco “The Bomber” Firano, the owner, and operator of BitGrail, and told to modify the Nano ledger in order to cover the losses in the hack. The team over at Nano claims that prior to contact there had been no technical issues with Nano’s underlying ledger; if anything, the issues were rooted in the BitGrail software.
Security researcher Tony Arcieri threw his hat into the ring shortly after the Nano team’s announcement, stating that if BitGrail was hacked, it was due to overwhelmingly poor security being incorrectly implemented or fundamentally flawed. Arcieri challenged BitGrail’s assertion, stating that a hacker could have possibly modified the BitGrail code locally in order to trick the exchange into thinking they had more coins than actually had. Much of this trickles back to Firano and the BitGrail team itself, as many on the Nano team claimed that Firano had been intentionally misleading the Nano team and the community at large in an effort to save the solvency of BitGrail, and to push for higher trades and exchanges.

BitGrail’s Damaged Brand

While still unsubstantiated, many crypto-aficionados claim that BitGrail has long been a dubious place to get your currency, with the exchange process and coin withdrawal process constantly being made harder and harder. This is a sign, perhaps, that restrictions on withdrawals and finessing of modified ledgers were methods to keep BitGrail competitive with a higher (falsely inflated) value.
Though the hacking of cryptocurrency is an inevitability and has already proven many of the naysayers right, the BitGrail/Nano situation is one that more closely resembles the shadiness of the modern market. The prohibition of improper inflation has always been a hallmark of cryptocurrency, making the BitGrail controversy a potential perversion of Crypto’s more, let’s say, utopian ideals.
The outcome of the pushback is still unclear; at present both sides are fighting a war of words, with Firano firing back on Twitter and calling the accusations “unfounded” and examples of “irresponsible behavior”. Meanwhile, many have lost all of the funds they had invested in and converted into cryptocurrency. After Coincheck experienced its own hack, the company announced that it would restore all stolen funds out of pocket, a promise BitGrail has yet to make any such announcement.