36 Percent Haircut and Debt Token to be Given to Customers of Bitfinex Exchange

Customers would stand to lose just over 36 percent of the assets they had on the platform but would be compensated for these losses with tokens of credit, crypto-currency exchange Bitfinex, which lost $72 million to hackers last week, told customers on Sunday.

Widening the group of those affected announced last week, the Hong Kong-based exchange said that the company’s clients and assets would be part of the sharing of the losses from the theft or they would be “generalized”.

“This is the closest approximation to what would happen in a liquidation context. Upon logging into the platform, customers will see that they have experienced a generalized loss percentage of 36.067 percent,” Bitfinex said on its website early on Sunday.

A “BFX” token crediting their losses that could be redeemed by the exchange or for shares in iFinex, the exchange’s parent company would also be given to all the affected clients, the company said.

Bitfinex said it was talking to investors about how to fully compensate its customers and would explain its methodology in a later update.

In the second-biggest breach of a crypto-currency exchange ever, in U.S. dollar terms, hackers stole 119,756 bitcoin from Bitfinex last week. The hack accounted for about 0.75 percent of all bitcoins in circulation.

The exchange is used for its deep liquidity in U.S. dollar/bitcoin trades and is the world’s largest for trading digital currencies such as bitcoin, litecoin and ether.

How the hackers gained access to the company’s customer accounts is still not clear.

Any breach in the security of the blockchain has been ruled out by both Bitfinex and outside experts. Blockchain is a software that traditional banks are considering adopting to increase the speed and transparency of their transactions and is the decentralized ledger that tracks every bitcoin transaction.

“Socializing” its losses across bitcoin balances and active loans to bitcoin/U.S. dollar positions was announced last week by Bitfinex. However a wider application of the losses to all accounts, which also include other digital currencies was announced on Sunday in a statement.

Within the next 24 to 48 hours¸ customers should be able to log on to its platform, it said on Sunday.

It is helping track the stolen bitcoins, Blockchain analysis company Chainalysis separately confirmed to Reuters.

The latest announcement saw the surge in the value of bitcoins which climbed to $594 as of 10:55 a.m. on Sunday in Tokyo. The value is calculated on the prices from Coinbase. According to Bloomberg prices, in what was bitcoin’s largest weekly decline since June, according to Bloomberg prices, the virtual currency dropped 12 percent to $577.23 in the week through Friday.

“After much thought, analysis, and consultation, we have arrived at the conclusion that losses must be generalized across all accounts and assets. In place of the loss in each wallet, we are crediting a token labeled BFX to record each customer’s discrete losses,” the exchange wrote in a blog post on Saturday.

The stealing of 119,756 bitcoin, or about $71 million at current values form the exchange was announced by Bitfinex on Thursday.

(Adapted from Reuters & Bloomberg)

Categories: Economy & Finance

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