The BitFinex Hack and why Steem Power may be the safest place to put your money for the foreseeable future

What the ____$! happened?

In an unexpected chain of events which could not be predicted, the Ethereum and Bitcoin communities are now both facing a similar dilemma. The Ethereum community decided to solve the DAO hack with a hard fork which I've supported on these grounds. This hard fork has resulted in the rise of Ethereum Classic and in a eerily suspiciously timed event, the hack of Bitfinex.

The hack of Bitfinex may have been an inside job

I offer no strong evidence to prove this, but there is circumstantial evidence which suggests the hackers at least had inside help. At the same time Bitcoin unlike Ethereum is unable to defend itself from state sponsored or state sanctioned hacks because unlike Ethereum the Bitcoin chain must remain immutable at any cost. As a result, of this immutable at any cost policy, there is a more attractive landscape for hackers who know Bitcoin is technologically on their side, and there is total free reign for state sponsored hackers because not only is Bitcoin on their side but an entire nation can provide them with support and a means of cashing out.

We must also remember, Bitfinex was one of the most ardent supporters of Ethereum Classic and immediately switched to allow trading of Ethereum Classic. The hack seems to have happened around the same time? For any curious investigators, I would suggest time stamp analysis of the chain of events and this is where I see evidence that not only could the hack have been an inside job but it may have been by a supporter of Ethereum Classic, possibly in support of Ethereum Classic. Obscene amounts of money are flowing into Ethereum Classic, some of it from honest sources, but this particular hack netted over 100,000 BTC which is enough to dump the entire crypto-ecosystem into another depression not seen since 2014 with the hack of MtGox.

The timing could not have been worse for Bitcoin

Bitcoin is currently in the process of something very important if it is to ever have a chance of reaching 10,000 USD a BTC or achieve wide adoption, and that is the block reward halving. This new supply pressure of over 100,000 coins may be enough to blunt any effect of the block reward halving, putting in place sell pressure which can contain the price of Bitcoin. What will happen to Bitcoin if traders realize that due to constant hacks such as this that the price will never reach 10,000 USD a BTC, or 5000 USD, or even 1000 USD? The traders could leave BTC in droves and for good this time.

Why I will not be holding Bitcoin any time soon

Because Bitcoin now has 100,000 of hacked coins floating around waiting to be dumped, I will not be buying Bitcoin. I will also not hold Bitcoin for any significant period of time just as I will not hold Ethereum Classic for any significant period of time because I know that the majority of holders are going to be bag holders if the hackers decide to dump. In essence, there is a critical threshold where if beyond a certain percentage of the coins on a chain are tainted by being hacked, that traders will refuse to hold, and I think Ethereum Classic and possibly Bitcoin have surpassed that threshold.

Steem Power and to a lesser extend Steem Dollars are currently a safe place

The money in Steem is known to be honestly earned. Blogging and other activities are behind the value provided by Steemit. The fact that money is honestly earned is going to be more attractive to traders who calculate their risks. In addition, Steem Power pays magnificent yearly interest of 90%. Finally, if Steemit is hacked the developers have shown a willingness to right the wrongs to protect the honest labor from dishonest labor (theft), and this in my opinion is attractive to honest money who don't want to buy Bitcoin or Ethereum Classic due to fear of a hacked controlled price.

There is no safer place that I know of right now in cryptospace to be than in Steem Power. But I do not advocate that people buy anything as I do not give investment advice. What I do advocate is that if you have enough time and talent to try to earn as much Steem Power as you can. In the circumstance that we enter another cryptospace depression as happened in 2014 then Steem Power is a in my opinion a great place to be.

References

Bitp. (2016, July). Bitfinex CSO: "I wish I never listed this piece of shit coin". Pro-forkers, do you see where this HF is leading us? Retrieved August 03, 2016, from https://www.reddit.com/r/ethereum/comments/4tn0s3/bitfinex_cso_i_wish_i_never_listed_this_piece_of/

Bitcoinist. (2016, July 12). Bitfinex Outages Raise Questions of Reliability and Regulation. Retrieved August 03, 2016, from http://bitcoinist.net/bitfinex-outages-reliability-regulation/

CoinMarketcap. (2016, August 03). Ethereum Classic (ETC). Retrieved from https://coinmarketcap.com/currencies/ethereum-classic/

Edwards, D. (2016, July). Moral question: For all who believe in no fork, how can a blockchain protect itself from corrupt government agents who steal by coercive means? - Steemit. Retrieved August 3, 2016, from https://steemit.com/dao/@dana-edwards/moral-question-for-all-who-believe-in-no-fork-how-can-a-blockchain-protect-itself-from-corrupt-government-agents-who-steal-by#@christoryan/re-dana-edwards-moral-question-for-all-who-believe-in-no-fork-how-can-a-blockchain-protect-itself-from-corrupt-government-agents-who-steal-by-20160713t110050779z

Sirer, E. G. (2016, August 03). How the Bitfinex Heist Could Have Been Avoided. Retrieved August 03, 2016, from http://hackingdistributed.com/2016/08/03/how-bitfinex-heist-could-have-been-avoided/