The world is catching up on cryptocurrencies, but there is a catch, exchange security is a headache. Since it is entirely digital based, it is prone to hacking. Industries and governments are still trying to come to terms with this ‘potential asset,’ but due to security concerns, it is not being given the time of the day that it deserves. The year 2018 alone witnessed four major hacks, $500 million from Coincheck, $195 million from BitGrail and $30 million from Bithumb. And there are more.
According to the Wall Street Journal, many hacking incidents have centered around Asia which is regarded as a ‘hotbed’ for cryptocurrency trading. It stated that many cryptocurrency exchanges charge fees for trading and store currencies for their customers, which analysts say makes cryptocurrency exchanges like sitting ducks. “Thieves that manage to break in can do something akin to robbing a bank, getting hold of valuable cryptocurrencies that they can cash out of.”
Vulnerable to Hacking
Experts say since cryptocurrencies are mere digital tokens, the cryptocurrency exchanges are easy to breach. According to The Street, “the largest flaw is that none of the transactions can be reversed and since the hackers are anonymous and can rob owners easily as their heists are not tracked.” Cybersecurity experts say hacking into the exchanges of the virtual currencies such as Coinbase, or personal wallets will only increase as the value of Bitcoin has skyrocketed.
Andrew McDonnell, president of AsTech, a San Francisco-based security consulting company says Bitcoin hacking is a popular criminal enterprise and owners of the currency must maintain confidentially of a Bitcoin address’s private key. He said with the key compromised the hackers can send the victim’s Bitcoin to themselves or an intermediary. They can also delete the key and digitally eliminate the Bitcoin. “Without the private key, there is no way to claim ownership of a set of Bitcoin since there is no central Bitcoin authority by design.” McDonnell further said that exchanges facilitate some degree of anonymity which is otherwise not provided by Bitcoin and are not likely to go anywhere so long as the cryptocurrency ecosystem persists in its current form.
According to Info Security, the cryptocurrencies are riskier because no authorized regulatory bodies exist to regulate these digital financial transactions. “This false sense of security is a problem because it lulls people into taking the wrong actions that play directly into the hackers’ plans.” Info Security also says that larger-state sponsored hacks of cryptocurrencies are often intended to cause widespread market chaos.
What Can Be Done
The first and foremost thing that investors and users have to keep in mind is ‘not to reveal their key to anyone.’ The co-founder of Chainalysis Jonathan Levin advises fellow investors to set up an unique email that they are going to use for that account. He said the password has to be really difficult and lengthy. Coinbase VP of operation, Dan Romero asks investors to turn off SMS-based two-factor authentication and account recovery for your email address.
While precautions can be taken, investors should be mindful that every software, website, and application till date has been hacked, so there is nothing like hack-proof. Every technology has weak points, and attacks vectors and the blockchain is no exception. Investors can keep on changing their password or logins from time to time to throw off hackers.
However, the ‘hacks’ have not deterred investors. The crypto market continues to attract a huge number of investors worldwide.