With the price of bitcoin (BTC) closing in on the $20,000 mark recently and other cryptos like ethereum (ETH), Litecoin (LTC) and ripple (XRP) experiencing price surges, there has never been a bullish time for digital currency investors than now. There is a downside to all that though, which is an increase in hacks.
Earlier this month, the SEC announced that it had to stop two ICOs after investigations revealed that they defrauded investors of $15 million. Even though there are other security problems surrounding cryptocurrencies such as fraud, hack remains the most serious threat for investors because it is widespread and so difficult for the average person to avoid.
The financial industry has witnessed several hacks, with the crypto market getting a share of it. Last year, a report released by the US Department of Homeland Security indicated that roughly 33% of the bitcoin exchanges have experienced hacks between 2009 and 2015.
As the prices get higher, so also the attacks. Hacking crypto exchange platforms are now more lucrative than ever due to the high prices of cryptocurrencies. Hackers can wheel away with millions of dollars in just a single attack. This will serve as a motivation for the hackers to expand their heist beyond the platforms to hack cryptocurrency investors as well.
Crypto investors are now faced with a huge problem as there are several ways cyber-criminals can attack their cryptocurrency savings, with little or nothing they can do to stop them. This is worsened by the fact that there is no FDIC insurance for the cryptocurrency, thus investors would likely lose everything in case of a hack.
Over the last few years, hackers have focused on exchange platforms, digital wallets, ICOs, DAOs (Decentralized Autonomous Organization), mining companies, virtual private servers and hosting services, and more. The biggest to be reported this year was the bitcoin mining company NiceHash being hacked. This single attack led to the loss of over $60 million for the company’s customers.
Other popular hacks that occurred include;
- 2017: Tether hacked for $31 million
- 2016: Bitfinex hacked for $77 million; The DAO hacked for $50 million
- 2014: Mt. Gox hacked for $450 million
- 2012: Linode hacked for $200,000; Bitfloor hacked for $250,000
These cyber-attacks reveal the lack of security behind most crypto organizations. It also shows investors and traders how difficult it is for crypto companies to protect the integrity of digital currency accounts.
These attacks though do not tell the full story. Even though they target exchange platforms and other crypto companies, they are shifting their focus to investors now. A report surfaced recently by Chainalysis which estimated that around $225 million had been stolen from cryptocurrency investors in 2017 alone. This occurred via means such as ICOs. The chances that an investor will be scammed during an ICO is just 10%, with hackers now posing as ICO officials and tricking investors into submitting crucial details like their payment credentials.