I have now seen multiple stories of crypto-currencies getting stolen or exchanges hacked. Then I read about how blockchain is supposed to be the end all, be all, of transaction security. Aren't these things connected at some level? What am I missing? How can something that is supposed to so hack resistance as blockchain allow for the common theft of crypto-currencies?
This is not a facetious question. It seems like the press (old man here, so using an old man term for everything in the public I read) is either breathlessly in awe of this stuff or telling me that someone just lost millions of dollars. I honestly don't know what to believe.
Crypto-currencies are secure at a mathematical level, regarding payment which is the transfer of funds from one wallet to another.
However payment involves compensation for the transfer of real-world assets, goods, and services, which is not covered (out-of-scope) of crypto-currencies, since regardless of how elegant the math is, there is simply no generic method to have any type of decentralized means of validating these real-world transfers. So we end up with a situation where "trusted" and "secure" 3rd party brokers are needed which act as crypto-currency intermediates between the buyer and seller, that can temporally hold the buyers purchase funds, in order to validate the transfer of real-world stuff from the seller to the buyer, before releasing the purchase funds to the seller.
Everything falls apart at "trusted" and "secure". Any 3rd party brokers will need to hold a large pool of crypto-currencies for purchases, and will need to have some type of online presence and infrastructure, which makes it a prime target for online attackers wanting to rob it. (In the same way that thieves target banks, because that is where the money is.) However time and time again we see that these 3rd party brokers are untrustworthy or incompetent, typically without even providing the minimum of security measures.
At the end of the day, this is where some government body (maybe from a different neutral country like Switzerland) will need to step up and implement some type of accreditation/certification of 3rd party brokers, that conform to the necessary regulation/protection and provide insurance protection, before crypto-currencies can really be trusted for transactions.