Back when Satoshi Nakamoto created Bitcoin, it’s a safe bet he never thought that one day his revolutionary digital currency would be subject to theft. Cryptocurrencies are, after all, incredibly secure thanks to the nature of blockchain technology. You can’t get mugged on a busy street and lose your Bitcoin balance, for instance.
The problem, ironically, is not in the underlying technology behind cryptocurrencies. However, when crypto coin holders choose to store their digital tokens in insecure locations, hackers and scammers come out of the woodwork to abscond with as many millions as they can..
If you store your crypto assets anywhere online, you’re in danger of losing your entire investment. That’s what Japanese coin holders discovered when Tokyo-based crypto exchange Coincheck suffered a catastrophic hack in January of 2018. More than $534 million ended up disappearing from the wallets of Coincheck users.
Prior to this event, Coincheck was one of the more popular exchanges for Asian crypto enthusiasts. Shortly after the theft, however, the Japanese government raided the exchange in the course of their investigation. In the face of several class-action lawsuits brought against the exchange, Coincheck began reimbursing affected investors in March of 2018.
Scamming Your Own Company
Hacking an exchange isn’t easy, but for most thieves it’s the best way to get your hands on other people’s profits. However, when you’re already a part of a trusted financial services company, it’s awfully tempting to begin skimming off the top — even though it’s almost guaranteed that you’re going to be caught anyway.
What’s what happened when Consolidated Trading LLC’s Joseph Kim decided to divert close to $2 million of the Chicago-based trading firm’s Litecoin and Bitcoin assets into his own accounts. Motivated by recovering personal losses from his own crypto trading efforts, Kim eventually got nabbed appearing in court in February of 2018 on wire fraud charges. He could face as much as 20 years behind bars for his poor decisions.
Wrecking the DAO
Our last two examples might be relatively current news, but one of the biggest and most notorious hacks occurred back in 2016. The DAO, the first large decentralized autonomous organization to be built on the Ethereum blockchain, was well on its way to becoming a wildly successful blockchain-based venture capital fund. After raising around $150 million worth of revenue, the DAO unfortunately ended up being plundered by some highly opportunistic hackers, erasing $50 million of that initial investment overnight.
Apparently, the DAO’s smart contracts that were hard-coded into the Ethereum blockchain had an undiscovered vulnerability, a loophole that allowed the anonymous hackers to breach the otherwise high security. The fallout from the event was massive, resulting in a notorious hard fork in a desperate attempt to roll back the blockchain to prior to the hack. The result is now history: the plundered blockchain was renamed Ethereum Classic, while the new one took on the mantle of Ethereum and continued to grow.
Robbing Mt. Gox
Going back further in time now to 2014, we return to Japan as the scene of the crime. Mt. Gox, yet another crypto exchange based in Tokyo, simply lost track of $400 million Bitcoins. This theft remained the biggest one in history until the Coincheck heist in 2018.
A few of the missing Bitcoins have been recovered over the years, but the lion’s share is still missing to this day. The Japanese government came down on Mt. Gox CEO Mark Karpelès, charging him with as many crimes as they possibly could, and the company itself crashed and burned as a result. Moral of the story: don’t keep your crypto in Japanese exchanges.
Stealing Iceland’s Mining Rigs
And now for something completely different: the theft of not cryptocurrency but the hardware used to make them. Iceland, a popular location for mining cryptocurrency thanks to the country’s cheap, abundant renewable energy to power mining rigs, was recently the setting of a wide-scale theft of a number of computers from server farms.
Along the span of two months , around 600 mining rigs were stolen from four different sites in Iceland. The computers themselves have not turned up, but in a bizarre turn of events one of the 11 people arrested and held for the crime recently escaped from prison on an aborted run for greener pastures.
Don’t Become a Victim
Barring completely strange instances like the Iceland heist, there’s one thread that runs through all these thefts: how completely insecure online systems can be. Yet this doesn’t mean you’re going to lose your own nest egg as well, of course. In actuality, there are a number of things that you can do to safeguard your own crypto assets and ensure you don’t become a victim of the next high-tech hack or heist.
The biggest point to be made is to keep your money out of online exchanges. Crypto thieves tend to target these sites, as there’s always a large amount of digital cash moving through the system. Better to keep your crypto in an isolated wallet that lives on your computer desktop, or a password-protected USB drive kept in a secure location like a locked drawer or safe deposit box. For another layer of protection, print out your wallet’s decryption keys and store them in a different secure location as well. Doing so will prevent anyone accessing your crypto investments even if they gain access to your computer or USB drive.
Crypto thefts might not be run of the mill, but they are something to keep in mind. However, taking the above recommendations to heart can keep you from becoming just another victim.
Author: A professional author, editor, and freelance writer for NoStop Blog Writing Service, David DeMar became involved in cryptocurrency in 2016 shortly before the infamous hack of The DAO. He claims it’s a coincidence.