WazirX hack: What are the options for affected investors?

To understand the implications of the WazirX hack, let's dig into some basics on cryptocurrencies, exchanges and wallets, as well as what options are available to affected investors.

Cryptocurrencies like bitcoin are a monetary asset that can be sent over the wire without relying on a single trusted intermediary. They are stored in crypto wallets, which contain private keys that can access your cryptocurrency on the blockchain database.

Hackers can gain access to your cryptocurrency by stealing your private keys or by attacking the centralized exchanges where your crypto is stored.

Throughout the history of crypto, hackers have attacked crypto exchanges, such as Mt.Gox, Bitfinex, and Binance. These hacks have resulted in billions of dollars in losses for customers and have highlighted the importance of robust security measures and crisis management strategies.

Now, let’s apply this knowledge to the recent hack of the Indian crypto exchange, WazirX.

WazirX has been hacked and customer funds have been lost. What are the options for customers now?

They can either go through judicial proceedings, which could take years (as happened with Mt.Gox), or they can use the Bitfiniex strategy of socializing losses, where they trade 55% of their funds and hope to recover their money over time.

It will be interesting to see how the regulators and the government of India investigate this issue. So far, there’s been almost complete silence from their end.

WazirX’s founders have announced that they are trying to work with their trading partners, investors, investigators, and other exchanges to keep its exchange open and recover the stolen assets.

They have also conducted a poll among its customers, giving them two options: access 55% of the funds without withdrawals and be first in line for recovery proceeds, or get 55% of the funds with withdrawal but be second in line in case of recovery of funds.

This plan has been met with criticism from many customers and industry colleagues from rival crypto exchanges. We will have to see how this unravels.

One thing is clear: Unless you take measures to protect the cryptocurrencies you own, there’s always a chance you could lose them to a hacker.