We are through the first half of 2018 and already Reuters has estimated that there has been roughly $761 million worth of cryptocurrency stolen from exchanges. The number of exchange heists is growing.
This is an increase of nearly three times the amount stolen from exchanges last year— $266 million, and it seems the battle is not over, as CipherTrace estimates that that figure could rise to $1.5 billion by the end of 2018.
The rise in theft has been significant since 2012, with the most recent being the digital robbery of two South Korean crypto exchanges last month. One attack saw up to $40 million stolen and the other saw $31.6 million thieved.
Exchange Heists: Storing Funds On an Exchange is a No-No!
Money stored on cryptocurrency exchanges often isn’t insured and therein lies a big problem. Investors are always encouraged to not store money on the exchanges due to the high risk of theft and instead are encouraged to store funds in a wallet. Thankfully many do, but that still doesn’t stop the percentage of risk takers leaving money on an online-always-connected-to-the-internet-platform.
And to add insult to injury, when hackers attack and are successful, often the entire cryptomarket prices drop (at least temporarily) meaning investors who aren’t directly victims of the hacked exchange can still lose money and be affected.
When we think of a hack our minds tend to imagine a hooded figure acting alone in a dingy basement of an Aunt’s house. Empty pizza boxes in the corner and a crack in a boarded up window emitting the only light apart from the screen of a modified and impressive albeit home-made security breaching system. But often this is not the case.
Attackers can be sophisticated: North Korea has been accused of hacking exchanges such as Youbit where 17% of the exchanges assets were stolen. The accusation was backed up by a theory suggesting North Korea was trying to get funds in the face of sanctions limiting its role in the global economy.
In December 2017, Youbit filed for bankruptcy after it was again targeted by cybercriminals.
Similarly, in March 2015 two former US Federal agents were charged with pocketing hundreds of thousands worth of Bitcoin.
“Large-scale hacks are among the biggest risks faced today by the global crypto community,” said Henri Arslanian, a financial technology expert at consulting firm PwC in Hong Kong. He further explains how, with the swift growth of exchanges, many platforms have not focused on security measures. And that coupled with the number of attacks has created difficult questions for national governments on how to regulate the industry.
If the stats are to be believed then further exchange heists will be on the horizon. Keep your funds stored in a wallet and be vigilant at this time, one measure to protect yourself is to be scrupulous about where you hold your funds and where you exchange them.
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