Security incidents like this are not new in the crypto world, but the size of these hacks is increasing as cryptocurrency prices have skyrocketed over the past year, attracting more mainstream attention.
According to data compiled by consumer website Comparitech, five of the 10 biggest crypto thefts so far this year have happened., And according to financial technical experts, these events could only continue because of the increase in the use of the cryptocurrency.
Here’s what’s happening — and what you need to know about how to protect your digital assets.
What is happening?
According to Tom Robinson, chief scientist at London-based crypto compliance firm Elliptic, the two main targets of crypto hackers currently are centralized exchanges and decentralized finance (DeFi) services.
Centralized exchanges have been a prime target of hacking groups for many years. These exchanges store user assets in “hot wallets” or digital wallets that are connected to the Internet. This makes them more accessible to users, but also potentially more vulnerable to knowledgeable hackers.
DeFi services are a new part of the crypto world. According to Robinson, DeFi software applications tend to cut exchanges together because they are run directly on top of the blockchain platform, and hacks to these services are usually caused by coding errors or issues with the design of the app. Prominent examples include a recent hack of the Poly Network as well as Badger DAO, a platform that gives users a vault to store bitcoins and make a profit. The Badger DAO hack resulted in a loss of $120 million.
“It’s clear from most of these attacks this year that it’s often a vulnerability that’s being exploited,” says Rebecca Moody, head of research at Comparitech. “The industry is growing at an exponential rate and is dependent on open source technology, this leaves the platform open to exploitation when hackers are able to find weaknesses in the code.”
What are you really at risk of losing?
Just because an exchange gets hacked, it doesn’t mean you lose all your money.
Each crypto service has different levels of resources to cover the hack. For example, Bitmart undertakes to cover all stolen assets.
According to Joe McGill, crypto-crime analyst at TRM Labs, if an entity does not have the ability to compensate affected users, there is still a chance that law enforcement – such as the IRS Criminal Investigation Cyber Unit – can recover stolen funds. able to.
But there is no guarantee. While many banks usually offer deposit insurance up to a certain amount, there is no such promise when holding crypto assets in a third party service. Some companies may have insurance to cover losses, but the level of coverage – if any – varies by platform.
As far as cryptocurrency stolen, it could go on forever. Adam Morris, co-founder of Crypto Head, told CNN Business, “More often than not, hackers successfully escape with stolen funds because the cryptocurrency is virtually untraceable and is easily disguised through wallets within minutes ”
How can cryptocurrency holders protect themselves?
when using crypto Wallet or exchange, experts say users should check the scale and professionalism of the company behind it.
“Do they have people responsible for cyber security? Does the company have a good track record? What is the size of the company? How many employees does it have? Those are all indicators you can trust the business is going to secure your assets.” in a responsible way,” Robinson says.
There are also basic security measures that users can take when accessing their crypto accounts. McGill recommends two-factor authentication, or hardware keys, which are essentially passwords kept on offline devices. He also recommends requiring approval for all crypto withdrawals as well as whitelisted addresses, which allow only certain addresses on your contact list to receive crypto funds from your account.
McGill cautions, “There is no 100% guarantee of cybercrime avoidance, but he added that it is important to understand the exchanges being used, their history with cybercrime, and the response systems.
According to Morris, another way to protect one’s crypto assets is to use A hardware wallet, known as “cold storage”, rather than being stored with a service. While considered the most secure way of storing crypto, this route puts all the responsibility of storing private keys on the user. if those keys are stolen or lost, There is no major financial institution to provide support.
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