The cryptocurrency space is still in its infancy. There is still not really a proper framework in place for the sector.
Many have likened the nascent sector as being akin to the Wild West in its beginning years. There were a lot of great companies and projects being created, but there was also a lot of nefarious activity in the space.
As the authorities still are coming to terms with how they can best place this sector, hackers have been benefitting massively from this lack of oversight. A lot of them are getting away with huge sums of money.
For example, in 2018 there was more than $1 billion stolen by hackers. The largest of these hacks in 2018 was worth $530 million following the hacking of Coincheck, a cryptocurrency exchange based in Japan.
The volume of attacks shows how important it is for you to not store your tokens in the hot wallets at the likes of these exchanges. When you acquire tokens, it is always a good idea to keep these tokens protected in the likes of a cold storage hardware wallet, This will give you peace of mind that your funds cannot be accessed by nefarious parties.
Here are some of the most notable cryptocurrency hacks that have taken place in recent years.
Perhaps the most famous of hacks in the cryptocurrency was that of Mount Gox. It is the largest hack of Bitcoin that has been recorded to date, as well as the most high-profile attack in the cryptocurrency space.
In the beginning years of Bitcoin, Mount Gox was the main exchange for cryptocurrency globally. It was looking after over 70% of Bitcoin transactions. Then it was in February 2014 that the discovery was made that over 850,000 Bitcoins were stolen from the exchange.
This took place over a three year period. Of these stolen coins, 750,000 of them were taken from the customer accounts.
The vulnerability that allowed this attack to happen was transaction malleability. This means that the hackers were able to edit the details of transactions. Therefore, they could make it appear that transactions to the hacker wallet never took place.
This is why it took so long for the exchange to realize what was happening. The incident led to the value of Bitcoin being decimated, as a lot of people were concerned about the security of conducting transactions with Bitcoin.
It was not even the first time that Mount Gox had been successfully hacked. In 2011, an auditor of the company had their computer compromised. This gave access to the hacker into the exchange who then proceeded to change Bitcoin’s nominal value by a single cent. This led to a massive sell-off and the hacker was able to benefit massively.
In August 2020 there as a strange incident that led to about 92 billion Bitcoin disappearing. it is believed to be the only time there has ever been a major security flaw discovered in the code of Bitcoin.
It allows the hacker to make 92 billion Bitcoin from nowhere. This of course would make the hacker the wealthiest person in the world, even at today’s Bitcoin prices. The flaw in the system was due to an error in the number overflow.
Thankfully, the Bitcoin community successfully canceled every one of these transactions. They were able to facilitate the rolling back of the blockchain to the way it was before the hack took place.
As one of the most used exchanges for cryptocurrency globally, Bitfinex deals with huge sums of money each day. There are 2 million people signed up to the exchange and each day they help to process billions in transactions.
It was in August 2016 that they were targeted by a hacker. When it took place, it was the second biggest hack in the history of the sector. Hackers managed to take 120,000 Bitcoins.
At the time, they had a value of about $72 million. At today’s prices, they would be worth about $480 million. The way hackers were able to gain access to these coins was through the way the exchanges utilizes multi-signature wallets.
These wallets had been in place for about a year, with the aim of reducing the threat of hackers. However, the code of these wallets was not up to scratch. There were two keys in the possession of Bitfinex and one with BitGo.
Both parties would be required to verify the transaction independently and sign off on it. However, BitGo ended up just doing whatever Bitfinex were doing. This meant that only a single point of failure existed.
Therefore, hackers got access to the servers of Bitfinex and this is how they were able to steal these coins. When the details of the hack was made public, it saw the price of Bitcoins dropping by 20%.
The Tokyo based exchange was the victim of an attack in January for 2018. The main target was the altcoin NEM.
This hack overtook Bitfinex’s attack in second place of the biggest historic cryptocurrency hacks. There were 500 million MEN tokens stolen, which at the time had a market value of about $550 million. When the details of the hack emerged NEM saw a price drop of more than 20%. This was 5% of the entire supply of this altcoin.
It was only a basic network hack that led to this theft. The hacker had access to the internal network for about eight hours before they were detected. In this time, they were able to direct coins to 11 different accounts.
For the users that were victims of this attack, they did receive some compensation from this exchange. There were 260,000 accounts in total that were affected from this attack. Coincheck used their own funds to give a certain amount of compensation per NEM coin that was stolen.