The history of cryptocurrency contains a litany of imaginario robberies. Cryptocurrency heists are like the handelsbank robberies of the wild westelijk. Ter just Five years, the industry has suffered dozens of losses to the tune of $ 1 billion.
Unlike bankgebouw robberies, however, malicious hacks are not covered by deposit insurance. You ought to take all the necessary security precautions when storing your cryptocurrencies. Leaving your funds on exchanges is a risk you cannot afford.
Perhaps this list of the largest cryptocurrency heists will remind you why it is significant to secure your cryptocurrency funds.
Mt. Gox, 2014: 744,408 Bitcoins Lost
Mt. Gox, an exchange based out of Japan, set the record for the industry&rsquo,s largest heist. Ter 2014, the exchange wasgoed one of few that permitted trading dollars for bitcoin. It quickly became popular, attracting clients from all around the world. At its peak, Mt. Gox treated 70% of all bitcoin transactions ter the world.
But the exchange bit off more than it could chew. Spil a custodian of millions of customers’ bitcoin funds, it turned into a lucrative honeypot for malicious hackers. Trouble began on February 14 when customers complained of late withdrawals. The company, headed by Mark Karpeles wasgoed incapable to explain the delays te withdrawals.
The truth wasgoed, Mt. Gox had bot compromised, and had bot leaking funds to hacker’s bitcoin address. While the management made every effort to voorkant up for the losses, the harm wasgoed irreparable. A leaked internal depressie management document exposed Mt. Gox wasgoed insolvent and had bot covering up losses for close to Two years.
Mt. Gox dented the reputation of cryptocurrencies and set back the industry by two years. A bankruptcy case proceeds to date. 200,000 bitcoins recovered from the hack have since bot refunded to customers out of the 744,408 total.
BitFinex, : 119,756 Bitcoins Lost
The BitFinex hack wasgoed the 2nd largest ter the history of exchange heists. Te August of , Bitfinex, based out of Hong Kong, lost almost 120,000 bitcoins valued at $75 million.
Bitfinex had switched to an alternative storage system that separated clients funds into segregated wallets. The switch ter policy wasgoed necessary to obey with the CFTC, a commodities regulators. BitGo wasgoed the official security playmate and provided an extra security layer for customer funds. The exchange moved from a cold storage vault system to individually labeled customer wallets.
Te this setup, BitGo transferred customer funds only at the request of Bitfinex. There wasgoed no limit spil long spil BitFinex introduced the necessary private keys. BitFinex held Two of Trio keys required, while BitGo used the third to authorize transactions.
Hackers made their way into BitFinex’s servers, stealing BitGo’s API keys and using them to authorize BitGo’s system to release 119, 756 bitcoins to their address.
To date, Bitfinex is yet to compensate customers for their lost funds. The exchange also suffered a massive reputation loss.
Bitstamp, : Nineteen,000 Bitcoins Hacked
Bitstamp has clawed its way back to a reputable exchange after losing Nineteen,000 bitcoins to a hacker ter July .
Bitstamp’s hackers launched persistent phishing attacks for 6 weeks on 6 of Bitstamp’s employees. They contacted employees via skype after conducting a background search on each of them. Luka Kodric, a systems administrator, wasgoed contacted via skype and email on December 11th, 2014. Under the pretense of seeking membership, the hackers sent documents which Luka consequently downloaded.
Luka’s pc wasgoed infiltrated and provided a route for hackers to fetch wallet.dat files and password phrases. A malicious VBA script wasgoed packaged together with an application word document. The script wasgoed programmed to run automatically and pull files from the host machine.
A week straks on January 4th, the hackers siphoned Legal,866 bitcoins from Bitstamp&rsquo,s hot wallet including incoming customer deposits valued at $Five.Two million. Bitstamp lost an extra $ Two million from reputational harm and loss of customers.
Since the attack, Bitstamp switched to cold storage wallets using Xapo’s vault service and added a multi-signature wallet access feature to its systems.
The DAO, : 36,000,000 Ether
The DAO wasgoed a decentralized autonomous organization whose governance structure wasgoed a clever contract code. A malicious attacker took advantage of a bug feature to siphon off 33% of the total funds raised by the DAO.
The DAO wasgoed the largest crowdfunding project te history, contrived spil an investment voertuig for its 11,000 members. Just like corporations, the DAO raised money from investors, about 11 million ETH valued at $150 million. Members were entitled to vote on suitable investment proposals. Unlike a corporation, however, no human beings were te charge of running it. It purely resided on the Ethereum blockchain and managed by code.
On 18th June, a hacker exploited a bug ter the DAO and funneled out Three.6 million Ether valued at $50 million. Because clever contracts are designed spil stand alone agreements, the creators were incapable to roll back the losses.
Cryptsy Exchange, : 13,000 Bitcoins, 300,000 Litecoins
Cryptsy exchange got hacked te July 2014, but the management only came out clean Legal months zometeen. For overheen one and a half years, the exchange attempted to make amends by channeling their revenues back into clients wallets. This strategy failed dreadfully forcing the company to opstopping for bankruptcy.
Lucky7 – the pseudonym of the attacker, found his way into Cryptsy&rsquo,s code and installed a Trojan malware. The trojan malware enabled him to access private information including wallet passphrases. Lucky7 went on to transfer 13,000 bitcoins and 300,000 litecoins valued at $6 million from Cryptsy&rsquo,s safe.
Cryptsy’s management, led by Paul Vernon, made efforts to restore customer funds while keeping mum about the hack. Overheen 12 months went by without a public statement. Soon, however, customer complaints of late withdrawals piled up. Blaming technical difficulties for suspended trading and delayed withdrawals only worked for so long.
Cryptsy eventually came clean te January , admitting the $6 million hack and filing for bankruptcy.
The cryptocurrency industry is fraught with many more incidences of hacks. Spil a cryptocurrency investor, always secure your funds te a wallet that you control. If you need to have any funds on an exchange, have a naked ondergrens.
Fortunately, the industry has taken lessons from thesis past failures. Cryptocurrency exchanges today are far more mature and professional te treating customer funds.