Cryptocurrency’s popularity has skyrocketed over the past few years. Many private investors and companies are embracing these assets for their independence and security, but the latter may be misleading. Crypto funds are vulnerable to hackers, too.
Blockchain technology, which cryptocurrency runs on, has many security benefits. These networks’ complexity and near-constant reviewing mean successful hacks against the blockchain itself are unlikely. However, hackers can still steal crypto by other means.
Cryptocurrency Security Issues
Cybercriminals stole $1.9 billion in cryptocurrency in 2020, despite many people thinking crypto is unhackable. Here are a few common ways that hackers can steal cryptocurrency despite its built-in protections.
Hacking Crypto Exchanges and Wallets
While blockchain technology itself is secure, you have to use a crypto exchange to buy and sell cryptocurrency. These exchanges are a favorite target for hackers. Since exchanges serve as an intermediary for crypto transactions, they have access to users’ wallets. Consequently, if a hacker infiltrates the exchange, they could access funds in these wallets.
Investors can move their cryptocurrency to wallets away from these exchanges, but even these are susceptible to hacking. Users need a key to access their wallets, and if that key is not in a secure location, hackers could steal it and unlock their wallets.
Multi-factor authentication (MFA) is an essential security feature, but it can also provide a gateway for hackers. Attackers can use SIM swapping, where they impersonate a target and convince telecom companies to give them control of a SIM card, to intercept MFA tokens. Alternatively, they could employ man-in-the-middle attacks to intercept MFA messages and gain account access.
Exploits like these have led to some of the most infamous crypto hacking incidents. In 2021, an MFA bug let threat actors steal cryptocurrency from more than 6,000 users on Coinbase, a major crypto exchange. A similar attack struck Crypto.com later the same year.
Hackers can also steal cryptocurrency through social engineering techniques. Phishing scams could give attackers phone numbers or the contact information they need to answer security questions to bypass MFA. Fake exchanges, crypto wallets, and investment opportunities are also increasingly common.
Social engineering can also give cybercriminals access to users’ crypto wallets. Once they have login credentials or MFA information, they can access wallet keys to empty them of their cryptocurrency. When that happens, the unchangeable nature of the blockchain makes it difficult to get those funds back.
How to Protect Crypto Investments
These attacks are becoming increasingly threatening as crypto becomes more popular. While Bitcoin has proven to be less resistant to inflation than people originally thought, it’s still growing. As more businesses and individual investors buy more cryptocurrency, crypto hacks will become more popular among cybercriminals.
Thankfully, there are solutions to this problem. Organizations and individuals should verify crypto exchanges’ security before using them. That includes checking for transparency, security certifications, and insurance in case something goes wrong.
It’s also important to store crypto investments away from exchanges and offline. Hardware wallets, small storage devices that hold cryptocurrency offline and behind password protection, help avoid risks related to exchange hacks. Be careful, though, as people have lost roughly $66.5 billion in cryptocurrency by losing these devices or forgetting their PINs.
As in any other cybersecurity endeavor, training is also crucial. Anyone with access to crypto wallets or exchanges should know how to spot and avoid phishing attempts and practice strong password management.
Cryptocurrency Isn’t Immune to Security Risks
Companies and investors should approach cryptocurrency with the same security reservations as anything else. While blockchain technology has substantial security benefits, it’s not a cure-all for hacking.
Understanding how cryptocurrency is vulnerable to hackers is the first step in protecting it. When you