Digital assets offered today are decentralized in nature, but most exchanges that allow users to buy and sell these assets are still centralized. Centralized crypto trading keeps their systems off-chain, which means that they operate as collateral for their clients, and transactions made are not recorded on the blockchain. This can lead to massive security breaches and unsafe storage of funds, information and private keys. Digital asset traders must understand the risks involved in trading on centralized exchanges.
For example, in 2014, Mt.Gox, the world's largest bitcoin exchange at that time, had lost $465M bitcoin through a security bug. In 2019, Binance Exchange, one of the most popular crypto trading exchanges, was hacked in 2019 with $41M worth of bitcoin stolen in a major cryptocurrency heist.
Even as cryptocurrencies and digital assets have increased widely and security systems are designed to protect customers and exchanges have grown more sophisticated, hacks have continued to occur.
Just recently, KuCoin, one of the largest cryptocurrency exchanges in the world, with over $76M trading volume per day, has been hacked. The exchange has lost $150M in funds. Bitcoin, ERC-20 and other tokens in KuCoin's hot wallets were transferred out of the exchange. But traders who lost their coins in the hack need not worry about it because KuCoin's insurance fund will cover everything.
In this latest hack, about 153 different ERC-20 tokens from different projects were stolen. One of which is from NOIA Network, which lost about $5M worth of tokens. This is such an unfortunate situation and can possibly hamper the ongoing projects. Still, thankfully, there's an opportunity for some of these projects to restore the balances of their token holders as it was before the hack with the use of PARSIQ's blockchain snapshot technology.
For those projects that reached out to PARSIQ, such as NOIA Network, the company will be using their innovative technology to do a "snapshot" of the state of their token holders before the hack. This will be a snapshot of all the addresses holding any balances with the exact amounts before the hack. PARSIQ has already taken the snapshot of NOIA Network and will also do a snapshot for the 152 other projects and upload it on a public landing page.
What the projects can do is use this snapshot to hard fork their token contract. In this way, the balances will now be restored to the token holders. This process is similar to reverting the blockchain to its previous state before the hack. PARSIQ's blockchain snapshot technology is directly helping the projects whose tokens were stolen from the KuCoin hack.
With PARSIQ's technology, projects can now have the option to invalidate the stolen coins through a hard fork. In the recent KuCoin hack, collaboration among exchanges, projects and blockchain automation and security platforms is key to solving the hacking incident as quickly as possible.