While sentiment across the cryptocurrency industry’s multitude of communities is rather buoyant, there have been two exceptions: those embroiled in the QuadrigaCX debacle and victims of the Cryptopia hack. But, those in the latter group were able to breathe a much-needed sigh of relief on Tuesday, as the New Zealand altcoin-centric exchange revealed that it had partially relaunched trading.
Yet, Cryptopia’s situation is all too cut and dried, as some users reported a loss in their exchange holdings. They call this a “haircut,” and it’s rather reminiscent of the Bitfinex hack of yesteryear.
Cryptopia Begins To Get Back On Its Feet
Cryptopia, a once well-known exchange, suffered a brutal hack in mid-January. Blockchain researchers claimed that the Christchurch-based company lost upwards of $16 million in Ethereum, ERC-20 tokens, and an array of unnamed digital assets. As the firm attempted to cool the hot water it was standing it, company representatives kept their mouth shut.
But, in the middle of February, local authorities gave the exchange an A-OK to resume trading. And since then, Cryptopia has begun to rebuild its platform, slowly putting the bricks down for a new, improved, and dramatically more secure iteration of its offering.
The startup launched a read-only iteration of its website two weeks back, giving users their first look in months at the exchange they once held dear. While many were underwhelmed by the process, Cryptopia finally reactivated trading on Tuesday. In a Twitter update posted recently, the team wrote:
Update: We have resumed trading on 40 trade pairs that we have quantified as secure. We will continue to expand this list as we clear more coins.
— Cryptopia Exchange (@Cryptopia_NZ) March 19, 2019
By and large, Cryptopia’s clients were pleased, posting cheery quips in response to the above tweet. However, there are still many facets of the platform that are surrounded by yellow tape. According to a Cryptopia letter, emailed to its clientele last week, deposits are still shuttered due to the exchange’s newfangled wallet solution. And as hinted at earlier, there still remain a mass of altcoins pairs that remain inactivated, as Cryptopia presumably assesses the logistic viability of introducing support for over 450 cryptocurrencies to its upgraded server.
What’s worst, however, is the haircut that Cryptopia’s users were greeted with when they opened their accounts. Cryptopia’s website states that all users with Bitcoin will have their holdings subject to a 14.04% haircut, meaning that a trader holding one BTC of the time of the hack will see their balance dwindle to 0.8596 BTC. Litecoin balances are reported to have received a 43% haircut. And Ethereum balances, which the hack’s executors seemingly targeted, were wiped off the face of the Earth through a 100% haircut.
Yet, Cryptopia has promised that there will be a rebate program. In the aforementioned email, Cryptopia C-suite member Rob Dawson wrote that for each hack-related withdrawal, users will receive Cryptopia Loss Marker (CLM), a digital representation of the value of a client’s assets lost in the attack. Dawson elaborates:
“CLM is not a coin, it can’t be traded as yet, it is just a number in the database that represents the loss for each coin for each user in $NZD at the time of the event.”
Although some cynics claim that CLM is just Cryptopia’s way to slyly avoid paying back the victims of this multi-million dollar attack, a precedent has been set for the success of this medium of reimbursement.
In 2016, Bitfinex, then one of the world’s largest cryptocurrency exchanges, lost $72 million worth of BItcoin in a surprising hack. Like in Cryptopia’s case, traders using the Hong Kong-headquartered platform took a “generalized” haircut, with this one being a platform-wide 36%. Bitfinex went on to establish a reimbursement token, BFX, before buying back the tokens at their $1 face value in the months that followed the August hack.
It isn’t clear whether Cryptopia will follow in the footsteps of Bitfinex, but victims of the hack are surely riding on it.