Hackers have been targeting cryptocurrency exchanges and making off with millions.
Cryptocurrency is one of the most secure kinds of currency out there. This is because of the blockchain, the technology that records cryptocurrency transactions. However, cryptocurrency exchanges and wallets we use to store our coins are not as safe. As hard as they try to be as secure as possible they are still vulnerable to hacking. The cryptocurrency market has become the new wild west, with very little oversight and plenty of outlaws ready to pounce on the first opportunity to profit.
Why has hacking cryptocurrency exchanges increased?
Currently, one Bitcoin is worth $9,672. If you own two Bitcoins and they are both stolen, you would lose the equivalent of almost $20,000. Most users store their cryptocurrency in online wallets hosted by cryptocurrency exchanges. These exchanges, however, are getting hacked more frequently. Why is this? Quite simply because cryptocurrencies have had such an immense rise in value over the last two years. A stash of coins that may have only been worth a few dollars in 2009 would now be worth thousands.
What are the ramifications of these hacks
One of the most notorious hacks in cryptocurrency history happened to Bitcoin exchange, Mt Gox, in 2014. Around 25 users lost a collected $473 million in Bitcoin. That was the valuation in 2014, so you can imagine how much that would be worth now. The exchange went bankrupt and to this day former customers are still waiting for compensation. Another cryptocurrency exchange hack looks like it might eclipse the Mt Gox scandal all together with a loss of $550 million in cryptocurrency. This happened at Japanese cryptocurrency exchange Coincheck in January of this year. The company has promised to compensate their users who have been affected but only with a partial refund.
Why the very nature of cryptocurrency makes it an easy target
Unlike paper money, or bank accounts which can be traced cryptocurrency was designed to be anonymous and untraceable. This makes it almost impossible to track down perpetrators of crypto exchange hacks. This is another thing that makes them so appealing to criminals. Even paper money comes with a unique code on each note that can be traced back to a bank if stolen, and most people receive notifications about unusual activity on their bank accounts and immediately report it to the bank. The bank is insured and will refund the money as soon as the claim is verified.
Online exchanges still aren’t as secure as traditional banks
In the case of cryptocurrency if online exchanges lose everything they don’t have a safety net. The banks have the government as well as a robust insurance policy. If a bank is robbed you will get your money back, if a cryptocurrency exchange is robbed the future of your assets is more uncertain.
What can you do to protect your cryptocurrency?
One of the best things you can do is keep your money in an offline wallet, also known as a cold wallet. This type of wallet stores your private key on a device that you plug into your computer. It only connects to the internet for the short amount of time it takes to verify your transaction. You can also use a paper wallet, this a wallet that you can print out and keep in a safe at home or at a bank. It provides you with a QR code with all the information you need to make a transaction and they can be created online. If you do decide that an online wallet is for you consider splitting your assets between multiple wallets, or find one that has a great security system and provides insurance.
You have to look out for your cryptocurrency like you would any other asset. You wouldn’t keep a priceless artwork in a shed so why would you store your Bitcoin on an unsecured network? If you are smart and do your research there is no reason you shouldn’t be able to keep your coins safe.
For tips on safety and more great cryptocurrency news, visit Crypto10.