Cryptocurrency Hacks

A man and a woman using laptop computers at a kitchen tableCryptocurrency is all the rage. Money you can’t see? Online accounts that aren’t regulated by big banks or even the feds? It has a futuristic feel, and anyone and everyone seems to be buying into the trend.

Lots of those folks who are buying up bitcoins by the hundreds claim cryptocurrency investment is the ticket to a richer tomorrow. But security experts think otherwise. They’ve repeatedly warned that all cryptocurrency is extremely vulnerable and at risk of being hacked – and that includes yours.

Is cryptocurrency the wave of the financial future, or is it really as risky as experts would have you think?

Before making your decision, read on to arm yourself with all the information you’ll need about cryptocurrency hacks.

How it works
Cryptocurrencies are decentralized and unregulated. That means there is no single country or institution controlling bitcoin, Ethereum or Litecoin. These currencies are, consequently, extremely volatile and vulnerable to risk. Since all cryptocurrency transactions are processed online, a hacker can simply break into crypto exchanges, drain people’s wallets and disappear without a trace.

As you may expect, hackers have been following the meteoric rise of cryptocurrency and are eager to cash in on the prize. They’ve been systematically frauding the system for years, and have only gotten bolder over time. In the most recent major heist, hackers made off with an incredible $530 million in cryptocurrency from Coincheck, the leading Asian bitcoin exchange, this past January.

And experts predict that it will get worse.
An Ernst & Young report studied 372 preliminary coin offerings between 2015 and 2017 and found that more than 10% of the funds were stolen, amounting to as much as $1.5 million a month.

It’s not only individuals who’ve been defrauded; the report shares that huge companies have lost several million dollars on hacked cryptocurrency.

According to Chainalysis, a risk management software company for virtual currencies, more than 50% of these hacks occurred through phishing.

In other instances, hackers have modified malware to redirect bitcoins to their own wallets during a trade or purchase. This scam is particularly nefarious because the hackers snag the victim’s exchange credentials and login information so they can gain complete control of the mark’s bitcoin wallets.

By extension, this means the hackers have also accessed the victim’s credit card information and can do untold damage to their credit score while racking up huge bills in the victim’s name.

Any way you slice it, cryptocurrency hacks pose a major risk to all investors and users.

Who’s paying?
Nearly 20% of bitcoin investors purchase their cryptocurrency using a credit card – and almost 25% of them cannot pay off their credit card balance after making this purchase.

Some credit card companies are ready to throw in the towel on cryptocurrency. They’ve had their fair share of headaches caused by cryptocurrency hacks aimed at their cardholders, including disputed charges, fraudulent transactions and the inability to pay for large purchases.

Earlier this year, many major credit card companies, including Discover and Capital One, announced they will no longer allow cardholders to purchase cryptocurrencies using their credit cards due to the high level of risk and potential fraud associated with such transactions.

Lots of financial institutions have followed suit with similar announcements, claiming the increased volatility poses a loss to the institution, which may be forced to pick up the pieces for their member if a cryptocurrency investment or purchase is hacked.

Are cryptocurrency exchanges government-regulated?
The short answer is no. The very attraction of bitcoins and Ethereum is that they are decentralized, answering to no institution or government.

A little digging reveals that some foreign countries, like China, are actually taking stronger approaches toward protecting their citizens from cryptocurrency fraud and are coming down hard on all scammers and hackers.

For the average U.S. citizen, though, when it comes to cryptocurrency, you’re on your own.

Protecting yourself
Cryptocurrency transactions pose an extra risk by being absolutely final. There’s no way to cancel a cryptocurrency payment, back out on a purchase or secure an anti-fraud guarantee from a reputable financial institution. In case of fraud, you may be able to trace the computer that was used for robbing you, but it’s nearly impossible to identify the scammers that took off with your money.

In other words, by using cryptocurrency, you’re putting yourself at significant risk. There’s no one protecting you and no way to undo the damage once you’ve made a payment that’s been hacked.

The only thing you can do is take proactive steps to be as careful as possible when engaging in crypto-payments:

1.) Stick to established, recognized exchanges, like Coinbase.

Only use exchanges you’ve heard of, and only those that utilize two-factor authentication.

2.) Don’t store too much digital currency online.

It’s best to store your money as actual greenbacks in a brick-and-mortar financial institution. You can keep some cash in your wallet or even hoard it in a home safe, but be careful not to put too much in an online digital exchange.

3.) Keep your OS and security software up-to-date.

Always accept and install the most recent patches and updates when they become available. To ensure your system doesn’t fall behind, elect to have it update automatically.

4.) Be wary of suspicious emails and links.

Never share sensitive information over the internet, no matter how sincere or urgent an email or link may appear to be. Don’t download anything from an unverifiable source, and keep your spam settings working at their strongest capacity.

Cryptocurrency may be the dollar bill of the future, but don’t fall prey to the many criminals who are counting on consumer naivety to make a quick buck. Use caution and be on guard to keep your money safe!

Your Turn:
Do you use or invest in cryptocurrencies? What precautions do you take against hacks? Share your own tips with us in the comments!

SOURCES:

https://www.google.com/amp/s/www.nbcnews.com/business/business-news/amp/hidden-dangers-buying-virtual-currency-go-beyond-simple-hack-n852706

http://money.cnn.com/2018/01/29/technology/coincheck-cryptocurrency-exchange-hack-japan/index.html

https://www.fool.com/investing/2018/01/29/after-the-biggest-cryptocurrency-hack-ever-bitcoin.aspx

What are Online Currencies?

Bitcoin and other online currencies, explained

man holding gold bitcoins in his upturned palmsIn the past several years, one of the most confusing terms to appear in the financial world has been “online currency” or, more specifically, “cryptocurrency.” Some bear seemingly silly names, such as the internet-meme-inspired Dogecoin, but the most famous, and certainly the most discussed, is Bitcoin.

However, the question remains: just what are these online currencies?

The basics
As TechRepublic points out, there are a few terms commonly used interchangeably for online currency, but which have different meanings. The first is “virtual currency” or “online currency,” which was identified by the U.S. Department of Treasury as operating like traditional currency but without legal tender. The European Central Bank defined it as unregulated digital money, usually under control of its developers, and used among specific online communities.

The second term is “digital currency,” which is a virtual currency that is created and stored electronically.

The third term is “cryptocurrency,” i.e. a digital currency which uses cryptography for security to make it difficult to counterfeit. This most specific subset, of which Bitcoin is the best example, is notable for not being issued by a central authority.

Cryptocurrencies are the most-used online currencies and have gained significant traction with established merchants as well as individuals. However, security is a higher risk. CNN Tech points out that Bitcoin in particular is stored either on a personal computer, where the coins can be accidentally deleted or destroyed by viruses; or the cloud, which can be hacked.

Value of these currencies, according to Bitconnect, is affected by a large number of factors, such as supply and demand and its utility, but is made “because people think it has value and use it as a unit of exchange.”

The reasoning
According to a paper published by the creator or creators of Bitcoin under the pseudonym Satoshi Nakamoto, one major reason for the creation of cryptocurrencies is to eliminate the need for a “trusted third party” in online transactions, which for the most part are financial institutions. This also eliminates transaction fees and the need to share personal information along with the currency, which previously was needed to ensure trust between the buyer and seller.

More plainly, this means a transaction that only involves the buyer and seller with no associated handling fees, which can be performed entirely anonymously.

The sources
To describe where these currencies come from, we will stick with Bitcoin, as the most widespread cryptocurrency.

According to CNN Tech, Bitcoins are generated by a process known as “mining,” where people use computers to solve complex math problems with specific, open-source software. In this way, the more powerful a computer is, the faster is can “mine” for the specific number of possible Bitcoins—although, as TechRepublic points out, this process places high demands on hardware power and uses a lot of energy, leading some groups of people to pool the power of their computers and share the resulting profits.

The future
The future of these online currencies is presently unclear. Bitconnect points out that the value of online currency faces significant legal and governmental issues, as most countries have yet to form legal precedents relating to them. Some have even banned their use, or given them an official status so that they can be taxed as income. In general, regulations surrounding online currencies are still in development.

Meanwhile, the future within the cryptocurrency community, which according to Investopedia uses over 700 different currencies, is also uncertain. Wired explains that there is a growing movement to merge all of the online currencies with technology that would allow each to interact with one another, known as the “interledger protocol.” This is led by the company which oversees the cryptocurrency Ripple, with support from Microsoft and the World Wide Web Consortium. In essence, this would allow one person to send any currency and have it arrive as any other currency.

In any case, online currencies are clearly not about to disappear, and could potentially have a great effect on the future of worldwide commerce.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.