The cryptocurrency industry has seen numerous unfortunate and malicious events. Particularly where trading platforms are concerned, there have been numerous issues over the past eleven years. Bitomart is one such example.
A Tough Period for Bitcoin Trading
Back when Bitcoin was barely gaining any popularity, it was nearly impossible to conveniently trade this cryptocurrency. It took a while until actual trading platforms were built to support BTC, and most of them disappeared under very suspicious circumstances.
It is not easy to run a trading for a cryptocurrency when the overall industry is still in its infancy. Exchanges and trading platforms used today are vastly superior to those first creations. A lot of the early exchanges were also run by just one or two individuals, making it very difficult to keep up with everything. In the case of Bitomart, its demise came due to a very costly human error.
Bitomart Stakes its Claim
In the year 2011, there were a handful of Bitcoin exchanges worth mentioning. A lot of users had issues trusting these platforms, because most of them didn’t look all that professional. It is worth noting the number of altcoins on the market at that time was close to zero, primarily because there wasn’t much interest in creating any.
One of the few trading platforms in existence by then went by the name of Bitomart. Serving as one of the first Bitcoin exchanges it was not necessarily a professional platform. In fact, the crucial aspects of the website ran on AWS Elastic Cloud, as using dedicated servers wasn’t necessary in this period due to small user bases.
The Wrong Update
Despite noting only marginal success since its inception, Bitomart’s operators were intent on making something of the platform. A few updates were provided along the way, with most of them trying to improve the look and feel of the exchange in many different ways.
One of those updates, deployed on August 1, 2011, resulted in the downfall of the Bitomart platform. unlike other exchanges at this time, the company did not suffer from a hack nor a data breach. Instead, it seems the update affected the server where the main wallet.dat file for the exchange was stored. That crucial file was mysteriously deleted, with no backup available.
Without this crucial file, the team had no way of accessing its own funds or that belonging to customers. Nor were they able to recover the file in question, effectively resulting in a net loss of 17,000 BTC. In US Dollar value, the total loss amounted to just under $224,000. At today’s price, this would be close to $122.4 million.
The Mt. Gox Angle
Knowing all too well the Bitcoin funds were one forever, there was very little the Bitomart team could do. They were forced to sell their debt to the Mt. Gox exchange in the weeks following this costly mistake. The exchange permanently shut its doors, and the customers were left scratching their heads.
A user error on this scale is rather uncommon in the cryptocurrency industry world. While a lot of money was lost in the process, the Bitomart story also serves as a crucial lesson to both novice and veteran enthusiasts alike.
A Lesson to Remember
If a user deposits funds to an exchange, they can no longer control it. It is best to never store funds on centralized platforms for more than a few hours on end.
Not your private keys, not your coins.