The rise of cryptocurrencies has brought terms like "Bitcoin," "Ethereum," and "Dogecoin" into everyday language and popular culture. However, this popularity has also led to a significant increase in cryptocurrency exchange hacks.
What Is Cryptocurrency?
Cryptocurrency is a decentralized, unregulated form of digital money built on blockchain technology. Unlike government-issued currencies, anyone can create, issue, and trade cryptocurrencies. As a result, there are many types of cryptocurrencies. Some of the most well-known include Bitcoin, Ethereum, Tether, Cardano, and Dogecoin.
In theory, cryptocurrencies can be used like traditional money, but adoption is still developing, and few major retailers currently accept them as payment.
However, the decentralized nature of cryptocurrencies makes them vulnerable to various issues. For example, the emergence of cryptocurrency trading has led many to treat these assets speculatively, similar to stocks, buying and selling based on expected value changes. More critically, malicious actors can exploit this decentralization to carry out cryptocurrency exchange hacks or trading platform attacks.
Types of Cryptocurrency Hacks
In 2022, numerous exchanges experienced cryptocurrency breaches, with [total stolen amounts reaching $3.8 billion](https://edition.cnn.com/2023/02/01/tech/crypto-hacks-2022/index.html), up from $3.3 billion in 2021. This increase occurred despite a decline in trading volume, largely due to falling investor confidence and repeated cryptocurrency trading attacks.
Understanding the different types of cryptocurrency hacks can help owners and traders protect their funds. Here are three of the most common forms of cryptocurrency-related crime.
Bridge Attacks
As the name suggests, bridge attacks target cryptocurrencies being transferred between different blockchains. Since each cryptocurrency exists on its own blockchain, moving them from one chain to another (e.g., from Ethereum to Dogecoin) involves a transfer protocol known as a cross-chain bridge. While essential for maintaining cryptocurrency momentum, these bridges are vulnerable to attacks. Hackers may exploit vulnerabilities in the bridge code or use stolen cryptographic keys.
Wallet Hacks
Cryptocurrency owners use wallets to store, manage, and transfer their assets. Wallets come in two forms: cold wallets (offline storage) and hot wallets (connected to the internet). Hot wallets are particularly susceptible to cryptocurrency exchange hacks. Cybercriminals can exploit network vulnerabilities to access encrypted wallets and steal any stored cryptocurrencies.
Exchange Hacks
Some cryptocurrency owners choose to manage their assets through cryptocurrency exchanges. These online platforms allow users to trade or store cryptocurrencies. Since exchanges often hold large amounts of digital assets, they are prime targets for hackers. Attackers use various methods, such as phishing and social engineering, to steal currencies stored in exchange hot wallets.
How Cryptocurrency Hacks Happen
Hackers employ multiple techniques to carry out cryptocurrency attacks. Understanding these methods can help owners and traders safeguard their funds. Here are three common approaches used in these breaches.
- Phishing: One of the most common digital attacks, phishing involves malicious actors sending emails to trick cryptocurrency owners into revealing sensitive information or downloading malware. This gives hackers access to encrypted wallets, allowing them to steal cryptocurrencies.
- Malicious Code: Cryptocurrencies and supporting software are built on code, which may contain vulnerabilities hackers can exploit. By manipulating weak points in the cryptocurrency infrastructure, attackers can execute exchange hacks, such as bridge attacks.
- Key Theft: Encrypted wallets and exchanges require owners to use keys to access their cryptocurrencies. If cybercriminals steal these keys, they can easily carry out cryptocurrency hacks.
As cryptocurrencies have grown in popularity, so too have the number of exchange hacks. Some of the largest attacks, like the FTX hack, have resulted in millions of dollars being stolen, exchanges shutting down, and, in some cases, legal action against exchange owners. While some platforms and wallets, like StormGain, have avoided major breaches so far, it may only be a matter of time. Below, we explore some of the most notorious cryptocurrency hacks.
1. Ronin Network
In March 2022, a group of cybercriminals (believed to be a North Korean hacker organization) infiltrated the gaming-focused Ronin Network exchange, stealing approximately $615 million in Ethereum and USDC stablecoins. This remains one of the largest cryptocurrency hacks to date. The hackers used stolen private keys from the owners to carry out the attack, making it a classic example of a key theft-based breach.
2. Poly Network
In August 2021, another major cryptocurrency exchange hack occurred when hackers exploited a vulnerability in Poly Network software to steal cryptocurrencies worth $611 million. Interestingly, the hacker claimed to have executed the attack merely to test its feasibility and eventually returned all the stolen funds.
3. FTX
The FTX hack in November 2022 is perhaps one of the most infamous. At the time, FTX was one of the most powerful exchanges in the cryptocurrency industry. On the day it declared bankruptcy, [the FTX exchange was hacked, with over $600 million in cryptocurrencies stolen from its wallets](https://www.coindesk.com/business/2022/11/12/ftx-crypto-wallets-see-mysterious-late-night-outflows-totalling-more-than-380m/). This was the first of two attacks on FTX. In January 2023, the exchange was breached again, losing $15 million in cryptocurrencies.
4. Binance
This is likely one of the most high-profile cryptocurrency trading hacks. In October 2022, cybercriminals targeted the Binance exchange, ultimately making off with $570 million in cryptocurrencies. To execute the attack, the hacker exploited the BSC Token Hub cross-chain bridge to create additional Binance coins, then withdrew all available cryptocurrencies.
5. Coincheck
The January 2018 attack on Tokyo-based Coincheck was one of the earlier cryptocurrency exchange hacks. The attacker exploited a vulnerability in the exchange's hot wallet, stealing a total of $534 million in NEM tokens. Coincheck compensated affected clients using its own funds, setting a high standard for companies responding to cryptocurrency exchange breaches.
6. Mt. Gox
This exchange suffered two major attacks, which contributed to its eventual collapse. The first attack occurred in 2011 when Mt. Gox handled nearly 70% of all cryptocurrency transactions. Attackers stole around $400,000 in cryptocurrencies. In 2014, the exchange was hacked again, this time losing approximately $437 million in cryptocurrencies from its hot wallets. At that point, it handled only about 7% of all available Bitcoin. The fallout from this attack led Mt. Gox to initiate liquidation procedures.
7. Bitmart
In December 2021, hackers attacked the Bitmart exchange, making off with over $196 million in cryptocurrencies. In this cryptocurrency hack, the attackers used stolen administrator keys to access the exchange's cryptocurrencies, then transferred them out via Ethereum and Binance.
8. Nomad Bridge
A classic example of a bridge attack, [the Nomad Bridge cryptocurrency trading hack resulted in user losses of $190 million](https://edition.cnn.com/2022/08/03/tech/crypto-bridge-hack-nomad/index.html). Hackers exploited a platform feature that allowed users to transfer cryptocurrencies between different blockchains. Only $36 million of the stolen funds were eventually recovered.
How to Protect Against Cryptocurrency Exchange Hacks
For anyone who owns or trades cryptocurrencies, taking security precautions is essential. While there are many steps you can take, here are some of the most recommended measures:
- Use a Cold Wallet: Cold wallets store Bitcoin offline (on hardware), making them harder targets for hackers.
- Employ a VPN (Virtual Private Network): Encrypting all online traffic adds an extra layer of security against attackers. 👉 Explore advanced security tools
- Practice Proactive Defense: Use antivirus software or firewalls, and ensure all software is up to date to protect your devices.
- Implement Basic Password Security: Follow fundamental advice like regularly updating passwords, creating strong passwords, or using a password manager to keep your passwords and encrypted wallets secure.
- Try Multi-Factor Authentication: Requiring multiple layers of verification when accessing encrypted wallets can help protect your Bitcoin from potential cryptocurrency hacks.
- Stay Vigilant Against Phishing Scams: Be cautious of any suspicious emails, calls, or texts that may aim to steal information or install malware. Never click on suspicious links or enter information on unsecured or potentially fraudulent websites.
- Secure Your Recovery Phrases: Recovery phrases are used to regain access to cryptocurrencies stored on exchanges or wallets. Losing these phrases could mean permanently losing access to your Bitcoin. If hackers obtain them, they can steal the associated assets.
Staying Vigilant Against Cryptocurrency Hacks
The FTX hack and its resulting legal battles and media attention, along with numerous other high-profile cryptocurrency breaches, highlight the need for owners and traders to remain alert to potential attacks. While protecting these assets requires basic internet security measures like using antivirus software, VPNs, and secure passwords, one crucial piece of advice is to use cold wallets, which are more challenging for hackers to compromise.
Frequently Asked Questions
What is the most common type of cryptocurrency hack?
Phishing attacks are among the most common, where hackers trick users into revealing sensitive information or downloading malware. Exchange and bridge attacks also frequently occur due to code vulnerabilities or key theft.
How can I tell if a cryptocurrency exchange is secure?
Look for exchanges that offer cold storage options, multi-factor authentication, and transparent security policies. Research past incidents and check how the platform responded to breaches.
Are cold wallets completely immune to hacking?
While cold wallets are significantly more secure than hot wallets because they are offline, they are not entirely immune. Physical theft or loss of the device, as well as attacks during transactions, can still pose risks.
What should I do if my cryptocurrency is stolen?
Report the theft to the exchange immediately and contact relevant authorities. However, recovering stolen cryptocurrencies is often challenging due to their decentralized and anonymous nature.
Can phishing attacks be avoided?
Yes, by being cautious with unsolicited emails, avoiding suspicious links, and using email filters and security software, you can reduce the risk of falling victim to phishing attacks.
Is multi-factor authentication necessary for cryptocurrency accounts?
Absolutely. Multi-factor authentication adds an extra layer of security, making it much harder for attackers to gain access even if they have your password.
Staying informed and proactive is key to safeguarding your digital assets in the ever-evolving landscape of cryptocurrency security. 👉 Learn more about protective strategies