A year ago, Bitcoin and cryptocurrencies lurked in the shadows of the dark internet, perceived by the public to be used by drug dealers and gun runners only. Sites like SilkRoad and AlphaBay utilized the anonymity of cryptocurrencies to protect the identity of some of the world’s darkest characters.
But a few believers held strong. Today the cryptocurrency world has exploded. The creator of Bitcoin, albeit under his nom de guerre, Satoshi Nakamoto, has been hailed as a hero of freedom and antigovernment sentiment. And this growth in awareness has come with a massive growth in value.
The cryptocurrency market has grown exponentially in volume as well as in valuation. The total market cap for all cryptocurrencies has recently crossed the $170 billion mark, an 800% growth for 2017. This kind of astronomical value basis increase has created an unprecedented boom in new users. This cycle, where awareness produces investment, which in turn produces greater awareness, is commonly known as a ‘Satoshi Cycle.’
Further, the foundational technology for Bitcoin and other cryptocurrencies, called ‘blockchain technology’ has also created a means for tokenizing assets and creating safe and secure ways to complete transactions. This technology is catching on just as quickly as cryptocurrencies, being adopted in more and more mainstream contexts, and especially with the tokenization aspect.
However, as market cap and mainstream awareness has grown, along with massive financial influx, so have the risks for cybersecurity meltdowns. Hackers and thieves are seeking new ways to attack Bitcoin and crypto wallets, as the value of stolen Bitcoin continues to rise. The need for flawless cybersecurity has never been higher.
Security Concerns
Recent security concerns have become almost ubiquitous in the cryptocurrency world. Massive hacking events have taken place, which has shaken the foundations for digital wallets, causing mass chaos and confusion.
The most recent multi-sig wallet hack perpetrated against the Parity wallet system, caused mass chaos and confusion, as nearly 155,000 ETH ($50 million at today’s ETH prices) were drained from three large-scale multi-signature wallets. The hackers were able to gain access through a simple command flaw within the Parity system.
The only thing that saved them from emptying all the wallets was a group of ‘white hat hackers’ (think white hat vs. black hat in old westerns – good guy hackers) who quickly noticed the unusual account activity, discovered the flaw, and used it to drain the rest of the wallets into a third party holding wallet and then redistribute them after the threat had passed.
The event drew attention to the major security flaws that have surfaced among cryptocurrency wallets, as new wallets and exchanges have come online in rapid succession. But ETH is not the only affected currency. Bitcoin has also had its own share of hacking attacks.
Consider the case of the hacker who explained his lengthy hacking career on Steemit. He detailed how he was able to use a SQL injection to drain several hundred Bitcoin from a number of otherwise secure wallets. The hacker only stopped out of a desire to not get caught and has only recently published his adventures anonymously.
Without appropriate security measures within applications and cryptocurrency wallets, investors stand to follow in the footsteps of these victims. Investors should carefully evaluate which security protocols are being used by the wallets they’ve chosen and carefully select those with two-factor authentication (2FA) and robust firewalls.
Being a victim of a hacker can be a painful experience, but with appropriate measures in place, cryptocurrency investors can remain safe. With the increase in price and the new push toward tokenization, the need for additional security to protect assets is clear.