$10 million. This is the total amount of cryptocurrency stolen every day. It doesn’t matter how much you try to protect your coins, there are still some people who will attempt to steal them. Fortunately, there is a way of keeping your funds secure. Read about the best practices for staying safe.
The cryptocurrency sector is growing fast. Many people are getting involved through buying, trading, mining, and storing coins. A common reason for joining the market is to have a reliable resource that will increase in value over time.
The influx of newcomers and the growth of technological development are propelling the expansion of the whole branch. The average daily trading volume on cryptocurrency markets has hit a level of around $100 billion.
The proportion of crypto exchanges is also staggering. At this moment, one can trade with crypto on more than 300 platforms.
It can only get better, you might say. Sadly, whenever something new appears and excites the world, some people quickly want to spoil it. This often happens with technological solutions that are just taking shape. Such as cryptocurrencies.
A negative phenomenon that is putting a strain on this sector is theft.
Crypto theft has become a serious problem
In 2010, the very first crypto exchange kicked off. Since then, hackers have carried out 51 attacks on dozens of other exchange platforms. On top of that, over $2.1 billion worth of crypto assets have disappeared from users’ accounts.
According to the US Federal Trade Commission, between October 2020 and March 2021, nearly 7,000 people lost more than $80 million. That’s a 1,000 percent increase from a year ago.
Hacking attacks usually result in theft. But there are many other forms of scams, including fake currency exchanges and phony websites selling digital currencies.
Thieves and hackers are becoming more and more audacious. Owing to their misdeeds, people around the world are losing $10 million of their crypto fortunes. And this is just the daily number!
Fat cats in the firing line
You may think that a hacking attack can only happen to a small exchange that doesn’t put much effort into increasing the security of the infrastructure. Well, that isn’t true.
Mt. Gox, founded in 2009, has become a major cryptocurrency exchange for handling Bitcoin transactions. But, in 2011 and 2014, hackers raided the platform and stole thousands of bitcoins.
On the first occasion, the loss was $8.750 million, and $661.348 million on the second. The scandal led the stock market to close in 2014. But that wasn’t the end of the story.
There is an ongoing debate about recovery for people who trusted the Mt. Gox and lost their funds. Claimants would recover funds in yen (JPY), Bitcoin (BTC), or Bitcoin Cash (BCH).
The amount of each claim would be denominated in yen, with 1 BTC pegged to 749,318 yen (about $7,205). The value of BTC would be set to what it was in 2018 when the proceedings began.
But the list of hackers’ victims is longer. Binance, Vircurex, Bitcoinica, Cryptsy, MintPall are all on it, to name just a few. It’s hard to admit, but crimes in the crypto sector are a tangible threat.
Crypto exchanges: a honey pot for hackers
Why do hackers deliberately target crypto exchanges? Well, they have a reason for doing so. First and foremost, users trade different cryptocurrencies through crypto exchanges. That’s the essential activity of these platforms, making them a significant part of the cryptocurrency ecosystem.
Secondly, most exchanges are centralized. It means that the professionals who are in charge have direct access to many different types of cryptocurrencies. They are also accountable for carrying out a certain volume of trading transactions, deposits, and withdrawals.
From the user’s point of view, exchanges are something of a custodian. Holders of cryptocurrencies consign their funds to the exchanges and trust them to look after them. But the popularity and content of these platforms make them a tasty temptation for thieves.
Keys that open the door to exchanges
Cryptocurrencies as such are secured by cryptography. But cryptography is also a base ingredient of the keys used to transfer funds. To be precise, it’s a pair of keys – a public key and a private key.
The public key is like a bank account number that identifies and allows users to send and receive the crypto assets. So, a function of a private key is to pass the crypto assets stored at the corresponding public address.
Generally, cryptocurrencies are attached to different public addresses, and all users can see them on the blockchain.
Thefts are about getting access to the private keys
The rule is simple. Whoever has the private key owns the cryptocurrencies. This means that the user is, de facto, his own bank. It sounds like a great distinction, but it’s also a commitment. Because every private key that is poorly or insufficiently secured can be a target for theft.
That’s why hackers attempt to take over the private keys of a user.
So, let’s do a recap. The exchanges accumulate huge amounts of valuable resources. On top of that, private keys are stored online and are in constant use. The security rules for digital assets are not well regulated.
This therefore makes crypto exchanges a perfect honey pot for hackers.
Crypto safety: multisig wallets
So, how can you fix this situation? One of the safety measures and good practices in the crypto space is to use multisignature wallets. As the name implies, multiple private keys secure these crypto wallets.
Therefore, multiple private keys are necessary to perform a transaction.
These private keys secure a public key address, which effectively disburses access to the funds to multiple parties. For hackers, it means that they’ll need access to all of the keys to carry out their swindles.
This type of wallet is the solution of choice for institutions like crypto exchanges.
BTCV and 3-Key Security Solution
Some cryptocurrency projects are planning to resolve the issue of securing transactions once and for all. One of them is Bitcoin Vault (BTCV). Its 3-Key Security Solution is worth more than just a quick look.
So, what is this solution? When you transfer funds and then feel that something is wrong, you can easily cancel a suspicious transaction. You have approximately 24 hours to do so.
Another thing that is rather unique in the crypto sector is the development of a whole ecosystem of tools and apps. BTCV works best when it is backed by the Electrum Vault desktop wallet and the mobile Gold Wallet. That last one can also work as a 2-Factor Authenticator.
Cryptocurrencies may be the solution for people who value freedom. At the same time, because of their decentralized nature, they can become a target for those with wicked intentions.
But all is not lost.
BTCV with its 3-Key Security Solution seems to be the right choice for individuals and institutions who value the security of their assets above everything else.