For several of them cyptocurrencies like Bitcoin are always considered to be unsecure. Hence, is it secure enough to consider truly safe enough for the investment of life savings? Let’s find out…
Cyptocurrencies have been always considered unsecure and regarded as a ponzi scheme. The crucial question which everyone is thinking about is — whether cyptocurrencies are secure enough to ever be considered truly safe enough for the non-technical people to invest their life savings?
Hacking incidents of cryptocurrency exchanges like South Korean Coinrail and Bithumb with loss of tens of million dollars have created headlines and spiralling price drops in Bitcoin and other cryptocurrencies.
Partially, in the initial stages, cryptocurrencies like Bitcoin was that it’s transparent due to the distributed blockchain ledger. Basically, cryptocurrencies like Bitcoin was designed to eliminate the possibility of fraud by making a real-time, completely accurate ledger of transactions available to all who wished to see it. Ever since those early days, the whole Industry have cropped up with the combined goal of undermining two major tenets of the currency — which is security and anonymity.
A shadow Industry made up of organizations eager to decode transactions on the ledger to reveal the identity of the transactor and their history of payments has flourished. Parallely, hackers worked to create algorithms that targeted cryptocurrency exchanges in the hopes of haemorrhaging cash in their direction.
Issues with Cryptocurrency Exchange
In the past few months, it is estimated that $1.1 billion has been siphoned from cryptocurrency exchanges, thanks to instruments available for purchase in marketplaces found on the dark web. According to ‘Cryptocurrency Gold Rush on the Dark Web’, a report carried out by Carbon Black, ‘The available dark web marketplaces represent a $6.7 million illicit economy built from cryptocurrency-related malware development and sales.’
Although this malware primarily relates to ‘cryptojackers’ such as GhostMiner and Loap, which secretly mine cryptocurrency from computers without the owner’s awareness, there is also malware geared towards hacking cryptocurrency exchanges.
Several successful hacking incidents has compromised crypto exchanges, but does that mean cryptocurrencies are unsecure?
It is true that some hacking attacks have taken advantage of weaknesses in cryptocurrencies in a way that would not be applicable to fiat currencies — for instance by exploiting errors in their coding. An early attack on Bitcoin exploited a loophole in the algorithmic code which caused it to keep repeating the same transaction over and over again – in this case, transferring large sums of cash into the account of the hacker in question.
This was a similar story for the hack of the now obsolete DAO, a smart contract built on top of the Ethereum blockchain. These incidents are rare, and immediately countered by an update in the protocol of the currency. Instead, the vast majority of cryptocurrency hacks target not the underlying technology of the currency itself but the exchanges where these currencies are traded.
It’s true that many of these exchanges develop without adequate security or infrastructure in place, with some being run as startups by only two or three people. It’s for this reason, then, that 27% of cryptocurrency attacks are aimed at exchanges. And while most attacks are still aimed at Bitcoin – offering the promise of the most lavish returns – 44% are now targeted towards Monero, another cryptocurrency offering comparatively /low transaction fees, non-traceability and privacy.
Cryptocurrencies like Bitcoin are relatively safer than actually what it is assumed because it is the exchanges where they are traded that suffer security issues.