Crypto Security 101: Why Hackers are Targeting Your Assets
The crypto industry is witnessing several hacks lately to the tune of hundreds of millions of dollars. The untoward events are increasing in frequency with the rise of the industry’s popularity.
With more sophisticated applications and platforms deployed, hackers are finding ways to capitalize on vulnerabilities.
While users are making handsome profits with crypto investments, hackers are not far behind. High-profile hacks show how incentivizing it is to steal funds and operate on the dark side of crypto.
With every passing year recording new highs for stolen cryptocurrency, the industry finds itself in a concerning spot. More concerning is how effortlessly funds get stolen from the crypto industry compared to traditional finance.
The ease with which it gets done is translating to increased hacking incidents. Cryptocurrency is now an area of high interest for cybercriminals despite all the innovation crowding fintech, centralized or decentralized. But why?
Why do hackers attack crypto?
Several innovations and changes have occurred in the decentralized markets and the technologies that drive them, but one thing remains constant – users and platforms are getting attacked. Whether it is user negligence or the carelessness of the developers behind applications, the possibility of preventing attacks in the industry might seem impossible.
However, progress is being made to overcome the bleak state of security in the industry. Let us examine why attackers are more attracted to the crypto industry over others.
One of the most common reasons for hackers to attack crypto is for financial gain. Cryptocurrencies have become a popular target for cybercriminals due to their potential to make quick profits. Hackers use various techniques, such as phishing scams, ransomware attacks, and stealing private keys, to gain access to crypto wallets and steal funds.
Crypto exchanges, which are platforms that allow users to buy and sell cryptocurrencies, are also targeted by hackers. In 2019, the Japanese exchange Coincheck lost $534 million worth of cryptocurrency due to a hack. In 2020, the KuCoin exchange was hacked, resulting in the theft of $281 million worth of cryptocurrencies.
Political and Ideological Motivations
Hackers may also attack crypto for political or ideological reasons. Some hackers target cryptocurrencies that they deem unethical or those support activities that they oppose. For example, some hackers target cryptocurrencies used in illegal activities such as drug trafficking or terrorism.
In some cases, hackers target crypto projects or exchanges that promote ideologies that they oppose. Hackers may also target crypto projects that are linked to a certain political party or government. For example, North Korean hackers have been accused of targeting South Korean cryptocurrency exchanges.
Another reason for hackers to attack crypto is to exploit vulnerabilities in the crypto ecosystem. Cryptocurrencies are based on complex technology, and any vulnerability in the code can be exploited by hackers. In addition, new technologies and protocols are being developed all the time, and these may have vulnerabilities that can be exploited.
Some hackers may also target individual crypto users who have weak passwords or do not take adequate security measures to protect their assets. They may use tactics such as social engineering to gain access to user accounts or wallets.
Technologies That Operate Crypto Are Still New
Blockchain technology, the underlying framework that makes crypto transactions possible, is still very new. What started with Bitcoin and the network’s impeccable safety in preventing hackers from taking over, many complimentary applications and new networks inspired by its decentralization have yet to replicate its security.
Wallet applications, cryptocurrency exchanges, newer blockchains and consensus mechanisms, smart contracts, and many more are still in their developmental stages. Nevertheless, the innovation witnessed in the crypto industry is insanely high, and new implementations and use cases roll out very often.
The novel technology is cutting-edge even for tech-savvy crypto investors, and wrapping their heads around how to manage crypto securely requires a learning curve for most users. Unfortunately, attackers and scammers take advantage of this fact and pull fast ones over unsuspecting crypto users and investors who need to comprehend the functioning of crypto and blockchain infrastructures fully.
Moreover, the innovation experienced in the space and their implementation is way too quick, preventing the development of security standards needed for operating user assets from keeping up. For instance, attackers can find vulnerabilities with newly developed blockchains and stage 51% attacks – manipulating the amount of crypto they can spend and destroying the blockchain.
The newness of the technology is allowing hackers to find such holes in their security before the developers can consider them. Sadly, by this point, many platforms have grown to handle enormous amounts of user funds to which hackers gain access.
Crypto Industry Possesses Large Amounts of Value
Hackers are interested in attacking crypto platforms because they hold so much user funds and value. There is big money in the crypto industry because of the rising popularity of these digital assets. Bitcoin, Ethereum, and other altcoins are bringing ingenuine use cases to the fintech space, and user confidence in these assets is shooting up their market capitalizations to all-time highs.
The second half of the last decade has been a great time to invest in the crypto space because it has been breaking out into the mainstream. CoinGecko, the world’s largest cryptocurrency data aggregator, suggests that the total cryptocurrency market capitalization is close to $1 trillion and was known to be thrice that amount in the recent past.
The insanely high values of crypto coins and tokens are not just attractive to investors and spectators. Hackers identify what they can walk away with after staging successful exploits over the infrastructure that holds and operates cryptocurrencies.
The large amounts of liquidity crypto platforms possess and the vulnerabilities accompanying them are too hard to resist for those that can exploit them. Crypto is where the money is, and hackers attack crypto to walk away with all the money.
Lack Of Regulatory Oversight
The enormous value flowing through the crypto ecosystems needs stringent oversight from authorities and regulators. Crypto, a new development in the fintech space, and its rapid rise to relevance are catching legislators by surprise. The number of crypto users possess and, therefore, are at risk of losing is only becoming apparent after the fact. Thus, the chaotic crypto space has lacked regulations to protect investors and users from losing all their funds to attacks.
The lack of regulations allows crypto companies that manage user funds to engage in risky behavior and adopt sub-par security mechanisms. Moreover, more legal accountability is needed to motivate most crypto companies to adopt robust mechanisms to prevent attacks.
Such carelessness has led to the theft of large amounts of funds from platforms, leaving the users with nothing. For instance, such companies’ lack of AML and KYC framework implementation makes it easier for hackers to use platforms alongside unsuspecting users and dupe them of their funds.
However, this is changing presently as regulators worldwide are realizing the significance of crypto and how this ungoverned space can lead to disastrous results for investors. Laws and guidelines are being made for crypto businesses to adhere to if they want to operate. As regulations get enforced, crypto businesses will be held with the same accountability as traditional finance businesses. As a result, the crypto industry can expect better robustness in the time to come.
Various factors make hackers attack crypto ecosystems and run away with large sums. Unfortunately, the users always get the short end of the stick and lose their investments. Despite its quick ability to make users profits, cryptocurrency can be a scary place to invest. With no certainty of the security of funds in the ecosystem, users are conflicted with acquiring cryptocurrency.
However, regulators are entering the scene and making the ecosystem safer for usage. While several regulations are getting enforced, policies like AML and KYC are the most important in safeguarding user funds and platforms from attackers. Chargebackpros also contributes by helping monitor the source of crypto transactions and flagging “dirty sources”. The fear of losing your funds to attackers will soon be non-existent because of the upcoming crypto regulations across the globe.