What the Binance hack tells us about how crypto really works

Now that the dust is settling around the Binance hack, we can start to make sense of what happened. And the story is more revealing than the headline that $6.4 billion of cryptocurrency was stolen.

The blockchains were not hacked. Billions in stolen assets were subsequently frozen. Much of the remaining money can be watched moving across public ledgers. And investigators believe the attack ultimately raises money for North Korea.

Understanding how all four can be true tells us a great deal about how crypto actually works.

On 29 October, attackers moved approximately $6.4 billion in digital assets out of Binance's hot wallets (the internet-connected wallets exchanges use for day-to-day withdrawals) across multiple blockchains. Blockchain analytics firm Chainalysis describes it as the largest cryptocurrency theft on record.

At face value, this seems to reinforce a familiar concern: if billions in cryptocurrency can disappear in minutes, how secure is blockchain technology?

The blockchains were not hacked

On Ethereum, Chainalysis reports that the attacker used valid signed authorisations that allowed a Binance hot wallet to run code the attacker had deployed. Other compromised wallets appeared to make ordinary signed transfers. The underlying blockchains kept operating exactly according to their rules.