BitGrail got hacked and is insolvent
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I was a bit regretful when I saw how it skyrocketed in price, but now I know I made a reasonable choice... of course, perhaps I would have sold some time ago already and my money would be out of Bitgrail by now, multiplied by 10 or so. Or maybe not. But the risk was very real all along.
To me, exchange hacks and exchange risks are the biggest problem for crypto to be accessible to the mainstream. While we can't buy and store coins in a safe and trusted way, it won't be ready for the average (even reasonably tech-savvy) user.
Probably some Bitgrail users were minimizing the time their money was on the exchange, but they were unlucky enough to have it there at the wrong moment.
And anyway, this is not the kind of thing people should need to think about if we want crypto to become mainstream. If I place an order on my bank to buy some shares, I don't need to be thinking that I should go to the bank as soon as possible and request the original paper version of my shares (does that exist anymore?) to store in my safe because it could get stolen from the bank any day. The risk of that is so minimal no one but the most paranoid would worry about it. Having significant risks of that kind totally kills crypto (or at least all but the largest coins) as a mainstream option.
This is also why i decide to hold coins that i know i can hold with hardware wallets. Yes I wont make much gain speculating on altcoins, but i know i wont lose money due to risk as such
Perhaps some hackers knew how to reproduce this bug and were able to exploit it, but there were obviously errors from BitGrail and they should take responsibility.
I think Buttercoin was the first attempt but they pivoted then failed. It looks like there’s a few others but only a few small exchanges use them: https://www.reddit.com/r/Bitcoin/comments/37ku14/open_source...
Something that provides the core features of an exchange with focus on excellent security and proof-of-solvency built-in would give small exchanges (like BitGrail) a competitive advantage.
Additional benefits would include having a standard API others could more easily write tools for, and opportunity to experiment with things like instant cross-exchange transfers using payment channel / Lightning Network.
That said, it’s a pretty big undertaking. To do it well it would probably take a funded (or already successful) exchange or other company with related business model willing to do it.
Multiple suspicious things occurred prior to this announcement. For example, withdrawals were disabled for all unverified users and those who tried to verify saw that the verification queue was severely backlogged. You could terminate your account but only receive BTC regardless of what other currency(s) you had stored (many users are reporting their accounts were terminated but did not receive any BTC).
Some users reported that there was a bug that caused deposits to be duplicated. Ex: Deposit 1 ETH and the transaction would show up twice in your account therefore making your balance 2 ETH which then you could withdraw successfully.
Disclosure: I had XRB at BitGrail
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Even Bitcoin has forked to roll back transactions, though not recently, and in the past only due to protocol vulnerabilities, never 3rd party software like the DAO or a hacked exchange.
I’d be wary of mature cryptocurrencies where this is feasible, especially if it’s "fixing" something that doesn’t affect the majority of users.