The birth of crypto brought many great benefits for investors. Through digital currencies, investors found a way to make fast, secure and cost-efficient transactions. The industry has also brought transparency while maintaining privacy as crypto transactions do not divulge personal information.
Nonetheless, the space has high crime rates. As crypto became famous over time, the number of criminals targeting the sector also surged. Their crimes are mostly two-pronged: hacking and scamming. Crypto hacking involves the use of computer codes to fool online systems and hijack assets.
Types of Hacks
There are many types of hacks. The most common method of these is where a hacker accesses crypto exchanges and steals crypto assets stored in hot wallets.
Cryptojacking involves tricking crypto users into installing scripts that allow miners to use their victims’ computing power to mine cryptocurrencies. Criminals also plant ransomware in computers and demand payments in Bitcoin or other cryptocurrencies to remove the ransomware.
Types of Scams
On the other hand, scamming involves fraudulent ICO projects. They convince the general public to invest in their schemes. They usually promise massive profits on investments to lure their victims. After amassing a lot of money, the startups’ close shop and their founders vanish with investors’ funds.
According to a report by CryptoBeginners, scamming is complex. It also involves phishing scams, phone porting, impersonation of websites, use of fake emails and social media to obtain information, social media frauds, and plain old Ponzi schemes.
The sector has had its fair share of both hacking and scamming. Per CNBC, criminals are continuously coming up with ingenious methods of stealing digital assets, while evading capture. Reportedly, CipherTrace, a US-based cybersecurity firm, found that investors and exchanges lost $1.7 billion to crypto thieves in 2018 alone. This figure is a 400 percent increase from 2017.
How to Identify and Avoid Scams
However, there are several features that can help you to identify crypto scams and avoid being duped. According to a report by IrishTechNews, investors should look out for projects with unrealistic claims such as high returns on investments. You should also avoid projects without code bases. Those who lack key information and list fake people are a no-no.
The Largest Crypto Heists Since the Start of Time
Bitcoin, the mother of them all, surged from being worth a few pennies to hit $20,000 in less than a decade. As the coin ticked, so did the crime rate. Out of all crypto exchange hacks, the biggest ones were on Coincheck, Mt. Gox, BitGrail, Bitfinex, Zaif, and Coinrail. The biggest heists were in Bitcoin.
In January 2018, Coincheck broke the news that it had lost $500 million worth of NEM tokens after suffering a hack. This was record-setting – it was the biggest in the history of digital currencies, and one of the worst in recorded history. The exchange had poor security practices that allowed hackers to access and transfer funds. Fortunately, at the time of the hack, the crypto market had grown significantly, and the theft left quite a small hole on the crypto-sphere.
In February 2014, hackers plotted against Mt. Gox, a first-generation crypto exchange, and stole $460 million in BTC. Given that the crypto market was in its early stages, this hack almost crippled the whole market. It took a huge chunk out of the market cap.
A month after Coincheck’s hack, BitGrail became infamous for being the third worst hit crypto exchange. The Italy-based exchange reported in February 2018 that hackers had accessed it and made off with $187 million worth of Nano. After the hack, the Nano team and BitGrail began pointing fingers at each other. Nano claimed that BitGrail’s tendency of storing all crypto assets in hot wallets had given the hackers easy access to the funds. On the other hand, BitGrail’s CEO, Francesco Firano, refuted the claims, saying that it was an inside job.
In August 2016, Bitfinex was hacked, and $77 million in BTC lost. The exchange’s first investigation failed to show the cause of the attack. In October 2016, the FBI began probing the exchange after a Bitfinex user claimed that over a million dollars disappeared from his wallet during the hack. However, despite the FBI’s involvement, no one knows where the money went.
Later on, Bitfinex was in the news again, when researchers from the University of Texas found that organizations that traded with Bitfinex might have artificially caused BTC’s price to hit its all-time high in 2017.
Japan-based Zaif crypto exchange is the most recent crypto hack with a ‘good windfall’ for the thieves and bad news for the rest of us. In September 2018, hackers accessed the exchange and took $60 million in crypto. The firm tried to contain the situation by suspending all activities, but it was already too late.
Hackers stole $40 million from Coinrail, making it the sixth-biggest. This hack was unique in that the hackers stole different digital currencies.
Other Smaller Hacks
While the above incidents shook the world of cryptocurrencies leaving investors devastated, there are other smaller hacks.
- Prior to the 2014 hack, Mt. Gox had suffered another hack in 2011 that saw it lose $8.75 million.
- Bitcoin7, the third largest BTC/USD exchange globally in 2011, lost $50,000 after a group of Russian hackers stole 5,000 BTC from its wallets. The exchange shut down shortly after the attack.
- In 2012, hackers stole from Bitcoinica on three separate occasions. These thefts saw the exchange lose $228,000 in March, $87,000 in May, and $300,000 in July. It was just like clockwork.
- In September 2012, Bitfloor announced that it had lost $250,000 after hackers gained access to its system after a manual upgrade.
- A year later, Vicurex exchange suffered a $160,000 hack. At first, the attack did not attract a lot of attention from the press. It was until the exchange froze withdrawals that the exchange found that the hacker used a Ruby on Rails-based attack to compromise its system. Per the official, the hacker obtained login information to Vicurex’s VPS control account. The attacker then asked the firm’s service provider for the root password reset for all servers. They used the password to gain access to the funds.
In the following years, the frequency of hacks in the crypto arena increased. Hackers are constantly coming up with new ways to steal digital assets and getting away with it. The most recent hack was on DragonX, a crypto exchange that claims to be a safe and stable platform for BTC and ETH transactions. However, the exchange did not reveal how much the attacker stole.
An advice which has aged well cautions all buyers and sellers of cryptocurrencies not to keep their precious assets on the exchanges. Rather, they should save money in their own wallets.
In my opinion, it is high time we should embrace decentralized exchanges. Today’s upcoming article will explain the DEXs and how these would help in reducing the hacking attack rate.
Chile’s Finance Minister Introduces a Bill to Regulate the Crypto Industry
Leading Universities’s endowment funds venture into crypto
Bitcoin History time! How Well Do You Know Bitcoin?
News6 days ago
Corporate Traveller Partners with Bitpay to Introduce Crypto Payments
News5 days ago
Canadian Province Reduces Energy Costs to Attract Bitcoin Miners
News6 days ago
France Introduces New Crypto Regulations
Crypto 1015 days ago
Crypto ATMs: Devices for the Mass Adoption of Cryptocurrencies