Biggest Cryptocurrency Hacking Incidents.
You heard that cryptocurrencies are secure, more focused on privacy and easy to use.
Yes, but there are many pros and cons of cryptocurrencies, but if you are an investor or wanted to invest in cryptos you hear about the hacking attacks, stealing of crypto news every day or at least in a month.
Today I am sharing some biggest hacking events happened in the crypto world.
Silk Road Incident.
Silk Road is not a cryptocurrency exchange and it is not a victim of any hacking attacks.
But instead, Silk Road is a marketplace in the dark web that accepted cryptocurrency, it’s like an Amazon of the dark web.
It is popular for selling drugs and many illegal items on the darknet. Silk Road started in 2011 and completely shut down in 2015.
At that time it had 1,45,000 buyers and over 3,500 vendors with over 1 million transactions!.
The FBI managed to track down the exchange’s owner they have confiscated all of the BTC that was deposited on the website’s account.
FBI acquired almost 9.5 million BTC at that time it worth 1.2 billion dollars!.
This incident boost Bitcoin to become popular cryptocurrency.
Attacks On Mt. Gox.
Mt. Gox is a Japan-based crypto exchange. It was the world largest Bitcoin exchange, at the time of 2014 it is handling almost 70% of Bitcoin transactions!.
Mt. Gox is hacked twice, the first hacking happened in June 2011.
The attacker hacked into an Mt. Gox auditor’s computer and used it to transfer 2609 bitcoins to an address for which Mt. Gox had no keys.
This incident led to the suspension of Mt. Gox operations for several days, but they sustained themselves in the market, and they were able to regain the trust of users.
The second attack happened in 2014, at this time Mt. Gox handling 70% of Bitcoin transactions.
Mt. Gox employees failed to protect the private keys of its wallet where it stored all the customer’s deposits, and hackers would routinely drain this wallet into their own pockets.
This time around 850,000 Bitcoin ($700 Million) was missing from the exchange. In fact, it got so bad that the US banking system actually froze Mt. Gox out because of the regulatory problems.
On 7th February 2014, Mt. Gox halted operations and filed for bankruptcy, all investors lost their funds and no refunds were made.
DAO attack is the biggest attack on Ethereum. The entire ecosystem of Ethereum works on the basis of smart contracts.
Decentralized Autonomous Organization (DAO).
DAO basically going to be a decentralized venture capital fund based on Ethereum platform and it going to fund all future made in the eco-system.
It worked pretty straightforward if you want to build any DAPPS that would get funded, then you would have to buy “DAO Tokens” for a certain amount of Ether.
In the ICO, DAO raised 150 million worth Ethereum in just 28 days and it had 15% of total ether tokens issued to date!.
DAO had the exit function called “Split Function” with the help of this function you would get back the ether you have invested.
There was one condition in the contract, however, after splitting off from the DAO you would have to hold on to your ether for 28 days before you could spend them.
On 17th June 2016, someone exploited this very little loophole in the DAO and transferred one-third of the DAO’s funds. That’s around $50 million dollars.
But there was 28 days period that the hacker had to wait in order to take his interest and developers had to think what is the potential solution or reasonable action to solve this problem within 28 days.
The Ethereum community got together and decided that was the best way to go forward. But the developers realized that a soft-fork would result in a lot of DDOS (Denial of Service) attacks. The only other option was to hard fork the chain and this split up the community.
This “split” resulted in two different Ethereums. The original Ethereum Classic(ETC) and the new post-hard-fork coin Ethereum (ETH)
Bitfinex is Hong Kong-based cryptocurrency exchange platform, and Bitfinex announced the hack on August 2, 2016.
120,000 BTC was stolen from the exchange which was worth $72 million back then, making it the second-biggest Bitcoin hack since Mt. Gox.
Bitfinex advertised itself as having multi-signature wallets for each customer.
Somehow attackers were able to exploit a vulnerability in the multi-signature architecture of Bitfinex and BitGo.
A good thing is, Bitfinex issued BFX tokens to the hacked customers and promised to buy back these tokens at a later date instead of repaying their customers from their reserves or going out of business.
Bitfinex exchange is still up and running and doing well and now it has the heaviest volumes on BTC/USD pairs in the crypto world.
The BitFloor Hack.
Bitfloor was hacked in 2012 and lost 24,000 BTC it was worth around $250,000 back then.
The attack was possible because their Bitcoin funds were stored in entirety online wallet instead of offline.
Then the hacker managed to open their customers’ accounts using the backup keys and transferred them to another anonymous wallet.
BitFloor users were refunded, but the exchange was forced to close due to regulatory measures.
Attack On Poloniex.
Poloniex is one of the busiest exchanges of Bitcoin and altcoins, also they promised better security measures above anything else.
But the exchange was hacked in summer 2014. The exact number of Bitcoin lost was not shared by the company.
Basically, the hackers were able to exploit a faulty withdrawal code of Poloniex.
Sometime after the hack, exchange declared in the forum that their customer funds were reduced by 12.3%.
Fortunately, Poloniex survived this incident. The company also claimed that they had repaid their customers.
Bitstamp is the Slovenian Bitcoin exchange startup and it was founded in 2011 as an alternative to Mt.Gox.
On 4th January 2015, it was hacked by an anonymous hacker and 19,000 bitcoins (worth of $5 million) were lost.
Anonymous hacker sent a malicious file to exchange employees. One of the system administrators has neglected security rule and opened the file on the machine that had access to the exchange’s BTC wallet and 19000 BTC were stolen.
But after the hack Bitstamp still continues to operate and has been able to win back the trust of users.
Binance is established in 2017 by Changpeng Zhao(CZ) and Yi He.
Within a year it became number 1 cryptocurrency exchange by market capitalization of $1.3 billion.
In 2019 hackers manage to steal 7,000 Bitcoin worth of more than $40 million, plus some users 2-factor authentications and API tokens.
For stealing, hackers used many hacking techniques like Phishing, Viruses and other attacks.
And hackers were able to compromise several high-net-worth accounts, whose bitcoin was kept in Binance’s so-called hot wallet, which contain only 2% of the exchange’s total bitcoin holdings. CZ states that Binance’s other wallets are unaffected…
They announced refund using their Secure Asset Fund for Users (SAFU).
The exchange created the fund in July 2018 as a type of emergency insurance. Binance allocates 10% of its total trading fees to finance SAFU,
Above are some hacking incidents in the crypto world that caused a lot of losses, but they’re also many hacking incidents happened and happening.
Main reasons behind these hacking are many central exchanges are vulnerable to hacking.
The best way is to keep your cryptocurrencies in a hardware wallet like because hardware wallets are highly secure than the online wallets.
Always avoid storing crypto in exchanges only when if you are not interested in daily crypto trading, if you are interested then you can go to online exchanges.
Originally published at https://ccoingossip.com on October 11, 2018.