What Happened to the $570 Million Binance (BNB) Hack? And what does that really mean for crypto investors?
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Important takeaways
- The world’s largest crypto exchange, Binance, had to suspend deposits and withdrawals due to a hack.
- BNB is the fifth largest crypto by market cap, and the hack was for 2 million BNB tokens, resulting in $570 million.
- A hacker exploited a vulnerability in the BNB network, which revolves around news for the entire crypto space.
It was another major hack in the crypto space as the world’s largest crypto exchange by trading volume had a major problem on its network. Hackers siphoned (actually created) 2 million BNB, the native token of the Binance network, out of thin air due to a vulnerability resulting in the hack of an estimated $570 million.
It’s been a tumultuous year for cryptocurrency, with many high-profile coins dropping 70+ percent of their value since the start of 2022. As we consider the latest crypto scandal in a series of hacks, thefts and scams, let’s unpack this BNB hack and find out. out what it means for the cryptocurrency space.
What happened to the BNB hack?
The Binance coin (BNB) is the cryptocurrency coin that powers the BNB Chain ecosystem and is the official exchange token of the Binance cryptocurrency exchange. The token was originally launched on the Ethereum blockchain and then moved to the Binance Smart Chain, now known as the BNB Chain. The BNB chain consists of the BNB Beacon Chain and the BNB Smart Chain (BSC).
It was first reported that $100 million was hacked, and then the number went up drastically. About 2 million tokens of BNB (worth about $570 million) were withdrawn. Binance co-founder and CEO Changpeng Zhao (“CZ”) announced that the hack occurred on a cross-chain bridge where users transfer digital assets from one blockchain to another. The hackers were able to create 2 million BNB tokens out of thin air. The attacker was able to exploit a vulnerability in Binance Bridge and they sent themselves one million BNB tokens twice in a row. The hack occurred due to a flaw in the smart contract where hackers could falsify transactions and transfer money to the wallet.
The Binance CEO tweeted that the current impact was estimated to be worth around $100 million because a majority of the stolen tokens could not be transferred from the BNB chain. All validators were asked to temporarily suspend BSC and this helped to limit the problem. BSC confirmed that it arranged a shutdown of the entire blockchain once they discovered the problem and validators acted quickly. The BNB chain has a total of 44 different validators, of which 26 are currently active. The validators are responsible for confirming transactions on the blockchain.
The Binance CEO tweeted on October 6:
“An exploit on a cross-chain bridge, BSC Token Hub, resulted in extra BNB. We have asked all validators to temporarily suspend BSC. The issue is contained now. Your money is safe. We apologize for the inconvenience and will provide further updates as per this.”
He then went on CNBC on October 7 to further explain the situation and reassure BNB holders that their funds were safe.
What happened to BNB?
The price of BNB fell slightly on Friday after the hack on Thursday night. The good news is that the entire blockchain did not collapse as the problem was contained and dealt with almost immediately since the blockchain was shut down with the validators working together quickly. BNB holders also did not lose $570 million collectively, as the media headlines may have been confusing.
It was then reported that the hacker only got away with about $110 million instead of $570 million. The blockchain was also able to freeze another $7 million due to the help of its security partners. The Binance Smart Chain community will now hold a vote to determine the next steps. There is an assessment to freeze the stolen funds and set a bounty to catch the perpetrators of this hack.
On the morning of October 9, BNB coin, the fifth largest crypto by market capitalization, was at a price of $278.14, a decline of approximately 46.34% for 2022.
It is also worth noting that the overall cryptocurrency market experienced a drop due to the released labor data. Many crypto supporters initially hinted at how the digital asset would be independent of general economic woes, but this has not been the case, as we’ve seen crypto prices plummet with major economic announcements such as interest rate hikes impacting the stock market.
What does this mean for Crypto?
It appears that this BNB hack was an isolated incident and there were no other hacks in the crypto space at this time. This is apparently a case of unorganized crime, somewhat more opportunistic, if no less serious. The attacker was able to exploit a vulnerability in the BNB network due to a cross-chain bridge, and no other coins were affected. However, many crypto experts (including Vitalik Buterin, a founder of Ethereum) are skeptical of cross-chain bridges due to security concerns.
In the decentralized finance (DeFi) space, transactions are governed by code, and the mechanism appears to have many weaknesses. If these security limitations are addressed quickly, there’s a chance this hack could inspire others to test for similar vulnerabilities in the future.
The unfortunate news is that this hack only adds fuel to the uncertainty in the crypto space that has spooked many investors. There are many barriers to entry when it comes to mass adoption of crypto, and this is sure to have many doubters switching to digital currency.
What are other crypto issues worth knowing about?
It has been an extremely turbulent year in cryptocurrency, with many of the major coins dropping up to 80% in value since 2022 began. There have also been some major hacks and disasters that we need to touch on. It is estimated that around $2 trillion in value has been wiped from the crypto ecosystem since the rallies of 2020 and 2021 that sent token prices skyrocketing.
The Luna collapse saw an estimated $60 billion wiped from the crypto ecosystem. It sent shock waves throughout the crypto space when it became clear that even a stable coin like USDT could be depegated with many people losing their savings.
Chainalasys confirmed in August that around $2 billion worth of crypto had been lost due to cross-chain bridges. This theft has occurred over 13 different bridge notches with cross chains. It is estimated that 69% of stolen funds in 2022 will have occurred due to attacks on bridges. The report also mentions the disturbing news that hackers linked to North Korea have already stolen around $1 billion worth of crypto this year.
We also can’t forget the issue with Kim Kardashian and the SEC where she was fined $1.26 for not disclosing that she received financial compensation for promoting EthereumMax on her Instagram page. All of this news is just more negative publicity for the crypto space, where regulations are rumored to be coming. And soon, because of all these problems that cost users money.
How should you invest?
Although we understand the benefit of investing in digital assets because some experts believe that this online currency is the way of the future, there are still many serious risks associated with putting your money in this area. We cannot deny that there have been colossal losses in this space this year. We don’t want to see you lose your hard earned money.
For now, serious investors are willing to wait out this rounding off of the wild west of crypto and its obvious imperfections, because they are bullish for the long term.
If you are looking to invest in the cryptocurrency space, you may want to consider an investment kit such as our Crypto Kit or Emerging Tech Kit. These kits help spread risk across industries, not just investing in a single coin or company, but the entire ecosystem to secure. They both use artificial intelligence to assign portfolio weights each week across four corners: crypto, tech ETFs, large tech companies and small tech companies. Users can also activate Portfolio Protection at any time to protect your gains and reduce your losses, regardless of the industry in which you invest.
The bottom line
The biggest risk you take with investing in digital assets is that the space is not regulated, which can lead to hackers trying to exploit this space. With crypto prices plummeting in 2022, recovery does not appear to be imminent. We encourage you to do your own extensive research before investing your money in risky assets because you don’t want to lose everything you’ve worked for.
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