Lessons From $7 Million Worth of Ethereum CoinDash ICO Hack

ICOs seem to be the new rage in the cryptocurrency world right now and like any good thing, they have their downsides as well. ICOs are a mechanism by which funding is collected from people for a specific project, in return for crypto tokens, and depending on how the project moves along and takes shape and generates revenue, those who invested in the ICOs would get returns on their investments as the value of their tokens grow. This is similar in concept to IPOs in the stocks world.

Coindash, a company which looks to build a platform where you can analyse and track your crypto assets, launched an ICO to collect funds but was hit by a hack attack which has led to the loss of several millions. The estimates for the loss vary from $7 million to $10 million as the funds were stolen in the form of ether and hence the estimates vary as the value of ether varies on a daily basis.

Around 40,000 ethers were stolen in a manner which should be considered as a simple trick as far as the hacking world goes. The hackers simply hacked the website and changed the address to which the investors were supposed to send their ethers and thus the ethers that were sent since the change in address to the time when the coindash personnel identified the hack and announced the same, were routed to the hackers wallet.

Coindash has said that the investors who had sent it to the wrong address would be compensated in the form of ICO tokens though the exact amount of compensation has not yet been declared officially. They have also not identified the investors who would be compensated but more details are expected to be out pretty soon. It is going to be a difficult task to track down the exact investors who would have sent it to the wrong address as the stolen ethereum has not yet been dumped back into the market. When that happens, it would be easy to then find out where the ether came from and where it went to. This is the power of the blockchain technology.

Flaws in The System Clear for All To See

More than 2000 transactions have been affected due to this attack though the reasons and the exact methodology used is not yet clear. It is also not clear when the hackers would be dumping the stolen ether back into the market but this once again exposes the flaws in the system.

This is one of the many weaknesses in a yet to mature market like cryptocurrencies where the security flaws and all the possibilities have not yet been fully analysed and fixed. There are several gaps in the foundations which need to be studied and fixed but at the core of all this, we have the blockchain technology which is pretty much solid and this gives hopes that this market would be able to overcome all these issues in the medium term.

Any new market would be open to speculators and greedy people and that is why it is very important to be careful and understand the risks involved in the market before getting into it.