Australian Media Questions ASX’s Blockchain Drive in Light of Bitfinex Hack

After $65 millions were stolen from one of the largest Bitcoin exchanges, some fear the safety of blockchain technology.

Staying on the cutting edge of technology can bring great benefits to firms and institutions in today’s fast paced business world where established and flourishing industries can suddenly get completely disrupted overnight. One reason not everyone is doing it than, is that trying to do something really new and innovative, something that has not be proven to work yet, opens you up to criticism – especially in case of a public failure.

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We can see an example of this today with the start of a small backlash against blockchain technology, following the news of the hacking at one of the biggest Bitcoin exchange in the world, Bitfinex. This reaction could have been expected considering that most people don’t know the difference between bitcoin and blockchain, how centralized cryptocurrency exchanges work and only hear about the subject in the major news publications mainly when something goes terribly wrong (like with the DAO).

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Under the title of “ASX’s blockchain plans may have been hacked”, Alan Kohler an Editor-at-large at the Australian Business Review writes that the head of the Australian Securities Exchange (ASX) should reexamine the institution’s commitment to the technology. While he acknowledges that what happened to Bitfinex “is not directly relevant to the work that ASX and others are doing to use blockchain technology for clearing and settlement,” he says it does raise questions about the security, simplicity and cost of the implementation.

Kohler explains: “if it turns out a blockchain-based settlement system will require capital to back up the security for customers’ accounts in the distributed ledger, either directly or through insurance, then it might not be as cost-effective as first thought. How the Bitfinex hack was pulled off may not be known for a while, but if it turns out to be a problem with the multi-signature mechanism that is meant to replace fractional offline settlement, then it would undermine the whole basis for using blockchain.”

ASX owns approximately 8.5% of Blythe Masters’ Digital Asset Holdings which it selected to develop solutions for the Australian market utilizing distributed ledger technology. The exchange wants a blockchain solution that will help mitigate risk and reduce back-office administration and compliance costs, as well as offer faster settlement of equity transactions for investors.

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