Today altcoin exchange Poloniex issued a statement on industry growth and its effect on the company. With users complaining about interrupted service due to DDoS, and potential losses on accounts which stemmed from this, the company thought best to issue a statement. The statement started with the following:
“When we launched Poloniex over three years ago, we had a vision for a vibrant blockchain ecosystem supporting many innovative communities. Our goal was to build a trading platform for blockchain tokens that reduced the friction from acquiring tokens for all of these new and exciting blockchain networks. We are humbled to see so much of our vision for the blockchain community being realized.”
Poloniex stated that since January, there has been an increase of over 600% active traders online and they regularly process 640% more transactions than just 4 months ago.
Given this level of activity, the company wanted to remind users, especially new entrants, of some key considerations related to trading blockchain tokens. The full statement from Poloniex can be read below:
Blockchain token exchanges in general face operational threats that can disrupt the user (trader) experience. These intrusions come in the form of distributed denial of service (DDoS) attacks that target exchange servers with varying levels of sophistication, attempted laundering of funds or funding of terrorist activity, attempted theft of user funds, and other cybersecurity threats that get more creative with every iteration. Moreover, malicious threats to an online global exchange, like Poloniex, can occur at any time of the day, on any day of the year, and from anywhere on the planet. In the case of Poloniex, these threats are present every day, often with multiple, unrelenting DDoS attacks directed at several endpoints simultaneously.
Unlike many other markets, blockchain token exchanges strive to operate on a 24/7 basis with no weekends or holidays, all while under perpetual assault.
As exchanges like ours experience a surge of mainstream awareness about blockchain networks and tokens, new traders entering the ecosystem at exponential rates can strain exchange resources. In a short period of time, exchanges can see sudden and tremendous swells of new users seeking to create accounts, yet to meet compliance obligations, only so much of this onboarding process can be automated. Additionally, seasoned traders intensify buy and sell activity, and margin positions are rapidly being opened and closed. As trading activity multiplies with an expanding userbase, exchange staff and support grow only as fast as human resources can hire.
Poloniex is not immune to these operational challenges. In the face of heightened demand, we have worked diligently to scale up our operations safely and securely. We have been in the process of hiring and carefully vetting and training compliance specialists, support staff, developers, and management to match the exciting and rapid growth of the blockchain community and Poloniex. We have also provisioned and deployed over a dozen additional servers in the last month alone, but as any seasoned systems engineer can attest, there are areas where merely adding on more hardware will not address the kinds of complex challenges that exchanges like Poloniex face.
Trading blockchain tokens on an exchange, especially on margin, comes with a high level of risk. Traders new and old alike must be ever-mindful of price volatility, illiquidity risk, market manipulation, regulator activity, and various other items that make up the unique and unpredictable mosaic of factors affecting the value of any given blockchain token.
Poloniex does not advise on the merits of any particular trade (including the associated trading risks and strategies) or the tax consequences of any trades. We are an execution-only service. Even so, we want our community to take stock of these risks because as a general matter, trading risk may be compounded by operational stress whenever volume increases at massive scale over short periods of time. In addition, understanding these risks is important because to offer our services, Poloniex requires users to agree to our terms and accept these trading and operational risks. This means users accept the risk of transaction failure resulting from unanticipated or heightened technical difficulties, such as those resulting from operational challenges or sophisticated attacks. Review our full terms.
We hope these reminders put into context not only the operational challenges faced by global blockchain token exchanges like ours, but also the risks inherent in holding or trading blockchain tokens generally.
As blockchains enter the mainstream, we extend a warm welcome to new entrants and want to assure long time members of the Poloniex community of our commitment to scaling up and building the best exchange in the world.
– The Poloniex team
Poloniex released this statement in response to last week’s news that Berns Weiss LLP will investigate potential claims on behalf of cryptocurrency exchange users who may have incurred losses due to recent DDoS attacks, the full statement from the law firm is below:
San Francisco-based virtual currency exchange Kraken executed a large sell order for the popular cryptocurrency, Ether, which depressed the price of that currency. Within the same hour, the exchange’s website was the subject of a Distributed Denial of Service (DDoS) attack, which prevented Kraken users from logging into the site to manage their accounts.
Delaware-based exchange Poloniex was also the subject of a DDoS attack on May 8, 2017, within minutes of the execution of a large Ether sell order.
Due to users’ inability to access their accounts because of the attacks, both Kraken and Poloniex exercised their discretion to liquidate users’ margin accounts. This action has led users to assert that they may have been the victims of market manipulation and possible insider trading. If the exchanges or individuals associated with the exchanges violated the law, then users who suffered losses as a result of those violations may bring a lawsuit to recover money damages.
According to Jeffrey Berns, Managing Partner of Berns Weiss LLP, “the virtual currency/blockchain practice group of Berns Weiss LLP has been contacted by various people inquiring about potential legal action against Poloniex and Kraken with regard to the recent sell off at those exchanges in conjunction with DDoS attacks.”