Cryptocurrency adoption has skyrocketed over the last five years, but as with all good innovation, there are some who want to spoil the fun for others. Whilst the crypto-world is wonderful in many ways, it also has gaping vulnerabilities that expose traders and coin holders to theft and fraud. The security systems in place to protect crypto-users are constantly growing in sophistication, but as the defences are built up, so are the attacks, and that is a huge worry for anyone in the space.
In this past article we looked at exchange hacks, but this time, we are going to look at some of the wallets that have faced the battering ram of hackers and lost everything. Let’s start with some of the major stories from the last few years…
Bithumb’s Five Finger Discount
On June 19th, 2018, Bithumb, a popular trading exchange, was the victim of a powerful and coordinated hack that saw them become $31m worth of BTC poorer. At the time, Bithumb was the 6th-largest exchange in the world, but after several security incidents it dropped down the rankings, however, as we write this piece in September 2020, they’ve recovered to 5th.
So, how was $31m worth of BTC stolen from a wallet? Well, hackers simply targeted Bithumb’s hot wallet, essentially an online wallet that is far from the most secure way of holding crypto-funds. In response to the attack, Bithumb stopped trading temporarily and moved all of their crypto-assets to cold wallet storage whilst they upgraded their hot wallet security.
Coincheck yourself before you wreck yourself
At the end of January 2018, the crypto-world saw its largest ever wallet hack, with 523 million NEM coins going missing. At the time, this was worth about $534m or £380m, making NEM the 10th biggest cryptocurrency. Truly it was simply quite unfathomable to see such a vast amount of digital asset vanish. In quite dramatic fashion, Lon Wong, Founder of the NEM Foundation is quoted as saying that this was ‘the biggest theft in the history of the world’. The most avoidable part of this theft was that all of the half-billion dollars worth of NEM were stored on the same low-security single-signature hot wallet, a rookie mistake for an exchange of this size.
Bitpoint wallet attack sees $28 million stolen
In July 2019, Japanese exchange Bitpoint was the victim of a wallet hack that remarkably stole cryptocurrency from 55,000 (out of a total 100,000) users all at the same time. Of the $27.9m stolen, around $19m belonged to users, with the remaining $8.9m was in possession of Bitpoint, in a hot wallet. The full details of the hack were never released, but by piecing together articles and translated information, it can be perceived that the hackers briefly took control of Bitpoint, withdrew as much as they could from the wallet, and then found a way to steal another $2.3 from partner exchanges. Nobody has ever been caught or charged for this massive theft.