Binance's $6.3 billion security incident has left open questions about how the exchange managed its hot wallets and capped attacker access. Experts say public blockchain records cannot reveal its internal signing controls or transaction limits.
Binance's $6.3 billion security incident has left unanswered questions about how the exchange handled its hot wallets and limited what attackers could reach. The exchange did not respond to Cointelegraph's questions about its wallet balances and safeguards.
Co-CEO Richard Teng said on Oct. 30 that the attack affected the exchange's own hot wallet. Most customer assets sat in offline cold storage and moved to hot wallets only when users requested withdrawals, he said.
What blockchain records can and cannot show
Binance said in its initial report on Tuesday that attackers accessed an internal wallet-signing service to move funds outside its normal withdrawal process. It said some technical details would stay confidential to prevent further attacks.
Public blockchain records show funds moving, but they cannot establish the controls governing those transfers, CertiK analyst Jonathan Riss told Cointelegraph. He said the $6.3 billion figure was the cumulative value of assets affected across 10 blockchains, and that on Ethereum attackers repeatedly drained a hot wallet as new deposits arrived.
A wallet's balance at a single moment does not capture exposure, Riss said. When attackers hold valid signatures, their access depends on what the signing system allows them to transfer over time, and limits enforced by the requesting application can be bypassed if that application is compromised.
BitGo chief product officer Eugene Hahr also declined to speculate about Binance's internal safeguards. According to Hahr: "The breakdown of custody arrangements is a question Binance is best placed to answer," he said.
How much exchanges keep in hot wallets
Fireblocks co-founder and chief product officer Idan Ofrat said exchanges typically keep enough funds in hot wallets to cover a few days of expected withdrawals, often a low single-digit percentage of assets under management. Some use intermediate wallets that require manual approval for transfers to hot wallets, he said.
Alex Tobol, chief technology officer at Telegram-based crypto wallet Walt, said holding billions of dollars in hot wallets is not inherently unusual for an exchange of Binance's size. Replenishing them from cold storage should require a separate treasury decision and manual approval, he said.
Hahr added that controls applied before signing, including transaction limits and approved withdrawal addresses, can help contain losses when a system is compromised.
Source: Cointelegraph
Trading involves risk.
Risk Disclaimer
