Crypto Currency Hack
The real victims of the incessant cryptocurrency hacks
During an interview with the British Broadcasting Corporation (BBC), Chris said, “I’m going to lose nearly 2,500 euros (£2,100) worth of cryptocurrency coins.” In a recent hack attack on the cryptocurrency exchange Liquid Global, Chris, a small crypto-holder from Austria, was one of many victims.
The company has insisted it will compensate all customers affected by the $100m ($72.8m) attack. However, most customers still worry until the money is returned. The 38-year-old always remembers what’s at stake as he picks up customers in his old Volkswagen.
Are exchanges safe?
Cryptocurrency exchanges like Liquid are vital to the growing cryptocurrency market. Websites like these are the places online where people can buy and sell digital coins like Bitcoin and Ethereum and the place where they store some of their coins.
There is, however, a question of safety regarding exchanges. Here are examples of hacking events that have ravaged the crypto world:
- A crypto hacker offers a reward after stealing $600m
- In a crypto heist in Japan, hackers stole nearly $100m
- Cybercriminals’ new method of earning money
- Also, this month, another crypto platform, Poly Network, was hacked, losing $610m in customer funds.
- Since 2014, at least £1.6bn has been stolen by hackers from cryptocurrency platforms as part of at least a dozen other hacks.
The largest-ever cryptocurrency hacks
The Italian exchange BitGrail was hacked in 2018, and $146 million was stolen. The loss of funds is estimated to have hit 230,000 BitGrail users.
$281 million was stolen in 2020 from the Seychelles-based exchange by suspected North Korean hackers. Most of the money was recovered by the company, which refunded customers.
The Japanese exchange was hacked in 2014, causing $450 million of mainly Bitcoin to be lost. Unfortunately, no refunds have yet been made to the customers.
The Japanese exchange was robbed of $534m in 2018. Coincheck ultimately reimbursed the customers.
Earlier this month, 610 million dollars worth of cryptocurrency was stolen from this Chinese platform. All the funds have been returned, and customers have begun getting reimbursed.
Many platforms are unregulated, so customers are not guaranteed to get their money back when they lose tens of millions or even hundreds of millions of dollars.
Refunding customers who lose their funds
Frequently, customers do not receive the full refund or are only partially refunded – affectionately referred to as taking a haircut.
On Tuesday, Liquid Global’s chief operating officer, Seth Melamed, tweeted that “there will be no hair cuts.”
Despite cryptocurrencies’ apparent security concerns, financial commentator Frances Coppola says they need to learn faster.
Security is highly protected in the traditional banking system, and the industry is heavily regulated in this area.
Banking institutions are subject to hacking attacks consistently. They are both better prepared, and they also have the responsibility of reimbursing their customers, which cryptocurrencies don’t.”
According to her, individuals are more likely to be defrauded or hacked in traditional banking systems, which occur all the time and cost millions of dollars.
Ghaddar says crypto-hacking is symptomatic of a sector that’s still new and growing too quickly.
This is partially because these systems were built using open source technology. Open source is great because it uses the collective intelligence of a community to produce better software and protocols. Still, it is also a risk because some brilliant mind might find a vulnerability.”
According to Dr. Ghaddar, the only way to prevent attacks like these is to ensure more regulations and laws.
“If we truly want crypto to reach mass adoption, we need audits and testing. We need to have various standards that must be monitored so that market integrity is preserved.”
Cyber-attacks aren’t the only methods that have stung cryptocurrency investors. Unfortunately, there are other investors have faced over the years. Exit scams and rug pulls are just two of the more common forms of crypto-catastrophes.
Investigators are trying to calculate the amount lost in the collapse of the mysterious Africrypt exchange earlier this year when the founders vanished. Millions, maybe hundreds of millions, may have been lost in the collapse.
In 2019, customers of Canadian exchange QuadrigaCX also struggled to claim reimbursements in the wake of its founder’s death, which left more than $135 million worth of coins unaccounted for.
Of course, the traditional financial system also has its fair share of victims of massive pyramid schemes and other fraud, which probably outweigh most losses in the cryptocurrency world.
Though the crypto market is growing rapidly, it is still much smaller than the overall market, and recent history points to an industry-wide security issue.
According to a recent comment by the $600million hacker, “Hackers are our armed forces. If you are given weapons and can protect billions from other hackers while remaining anonymous, will you be a terrorist or Batman?”