A South Korean bitcoin exchange known as Yapizon was recently targeted by hackers who managed to get away with stealing over $5 million worth of bitcoin.
The amount that was lost in the hack adds up to about 37 of the bitcoin exchange’s total user funds, according to Yapizon’s legal team.
The earliest detailed report of the incident came from one of the bitcoin exchange’s officials, in which it was revealed that four of its hot wallets had been compromised by unknown hackers who stole an estimated 3,816 bitcoins ($5,367,852), some of which were user funds.
At this time, there are no leads as to which hacking outfit was responsible for the hack.
Yapizon Spreads Losses, Users Outraged
Yapizon users were livid when the bitcoin exchange announced the losses would be recouped from each and every user’s account.
Following the loss of 37 percent of their total reserves, the bitcoin exchange decided to make for the deficit by deducting 37 percent of the total balances in all user accounts.
Naturally, the announcement was met with outrage from the bitcoin exchange users, most of whom deemed it unfair compared to how another bitcoin exchange—Bitfinex—had managed to recover from a $72 million hack.
Bitfinex’s hacking attack resulted in the theft of 119,756 bitcoins ($168,732,611 at the current exchange rate) and forced bitcoin into one of the most dramatic dips of 2016.
Following one of the most devastating bitcoin exchange hacking attacks, Bitfinex’s recovery strategy involved handing out Bitfinex tokens to every user affected by the breach.
The bitcoin exchange company then proceeded to purchase the tokens from its users, effectively restoring their balances within a time period of just eight months.
Yapizon’s recovery strategy appears to be borrowing a leaf from Bitfinex.
The bitcoin exchange has started issuing Fei, tokens that entitle the traders to a share of the company’s profits, as a way of recouping the balances.
Yapizon’s Recovery Period May Be Too Long
A lot is still unclear about the bitcoin exchange’s recovery strategy. What is known is that the percentage of Fei issued to a trader warrants him/her to the corresponding percentage of profits (one percent of Fei equals one percent of profits).
Also, one token of Fei has a value of $78. For instance, if a user lost $5,000 worth of bitcoin in the attack, they would be compensated with approximately $64 Fei tokens.
Unlike Bitfinex, the South Korean bitcoin exchange will not buy back the issued tokens.
Instead, the users will eventually recoup their losses by getting a share of the company’s profits as time progresses.
Current projections show that the exchange is on course to making a profit of $1.8 million starting this year.
This means that it will take more than two years for the users of the exchange to fully recover from their losses.
Critics are arguing that since Yapizon’s loss was far less compared to Bitfinex, they should be able to recoup their losses much faster.
While the bitcoin exchange’s management team has no doubt the company will bounce back eventually, the long recovery period remains a thorn in the side of users who feel they should not have to wait that long.
Yapizon Has Stuttered, Not Fallen
The Yapizon team is confident that the four-year-old exchange is capable of bouncing back from the attack, although it will take time.
Since its founding, the firm has made great progress. In the first quarter of 2017, the company generated $325,000 in profits and remains on course for a $1.8 million profit at the end of the year.
They have asked their customers to trust that they’re working to help recoup their losses, which they say will happen “relatively soon.”