A few years ago cryptocurrency theft was a regular occurrence, especially among cryptocurrency exchanges. Hackers then took advantage of the pseudo anonymity of cryptocurrency transactions to steal other people’s wealth. Back then, hardly a week passed-by without the news of one platform breach or the other. Today, such nefarious activities have become rare. Not that it doesn’t happen at all anymore, but the industry seems to be a bit more sanitized from the actions of crypto thieves.
- Not like we want them to return, but for the sake of curiosity, what has happened to the rampant hackers of a few years back?
- Have crypto exchanges and platforms developed novel methods of protecting themselves from bad actors?
- Have the hackers run out of ideas?
- Have these bad guys stolen enough and are now too satisfied to want to steal more?
- Have they diversified into other related businesses with reduced risks, like Ponzi schemes?
- Has newer technology moved ahead of them that they find it difficult to overcome existing protocols in order to breach platforms?
- Are these hackers on a retreat, working hard and plotting on how to bounce back with some major hit?
In summary, what are the key reasons for the reduced frequency of traditional exchange hacks in recent times?
Improved Technology and Awareness
On this subject, the CEO of GameCredits, Jason Cassidy tells Coinstituency that Cryptocurrency is still very much the wild west, only just over a decade old now in terms of Bitcoin bringing it to the forefront of society.
Cassidy notes that the amount of hacking may be dropping and this is likely a result of better technological analysis as well as awareness. For example, in 2015, it was a small cadre of people who would be aware and take notice of a large exchange hack. Today, this can and often will make mainstream front page news if the amount stolen is high enough in value. Also, if the exchange hacked is well known then it will be hard to ensure the news cycle does not pick up the story.
Cassidy also explains that regulators and law enforcement have had years to understand blockchain analysis and the legal world has in part raised its collective IQ on what this means and how to litigate. According to him, the other measure in place that makes hacking more challenging and risky is the advancements in prevention.
Many exchanges being hacked have some doubt around whether they were self-hacks (inside jobs). This makes it an extremely risky proposition in today’s world, as if you are caught, the chances your identity will be linked to the crime is high, says Cassidy.
He concludes by noting that while we will continue to see bold hacks of cryptocurrency across the spectrum, the risk involved to pull off a heist like this is much higher. As the industry matures, so too does its safeguards with technology, law enforcement and the legal system.
Perhaps a Change of Style?
The founder, Giz Digital Assets Ltd. (GIZDAL) and co-founder of Farmchain, Golomo Stanley believes that the hackers will always be there. However, many of them may have metamorphosed, adopting alternative vices in the industry. These are mostly exercises that pay them more with less risk.
I see a lot of these hackers as promoters of the current ponzi schemes we see all over the place today. They are springing up relentlessly.like mad. These are prosecuted by highly skilled blockchain developers and hackers, he says.
Stanley acknowledges that many exchanges have beefed up their security features, unlike in the early years. He also is of the opinion that part of the reason why we don’t hear about exchange hacks so often anymore is due to the non-activity by hackers.
The Pain of “Startup Mentality”
Michael Vogel, CEO of Bitcoin ATM platform, Coinstream emphasized the fact that crypto hacks of the past were a stain on the industry as a whole. As a matter of fact, the recent Twitter crypto hacking incident has once again thrust Bitcoin into the negative spotlight. He notes that it definitely has seemed to be a period of relative calm in the crypto world with respect to negative news. “In fact everyone has been focused on the end of the bear market and the return to “good times” in the crypto world”, he says.
Also of note is the fact that 2019 was actually a record year for exchange hacks, with previous years being pretty bad as well. According to selfkey.org, there were 12 major crypto exchange hacks in 2019. Nearly $300,000,000 of cryptocurrency and over 500,000 logins compromised.
An order of priority that seems to be somewhat mixed up can be blamed for the loopholes seen in the crypto industry. Vogel describes this as “Startup Mentality”.
Startup mentality tends to value growth over strong foundation, and often cyber security is an afterthought. However, crypto exchanges are high profile targets for hackers: low risk, high reward. A data breach has the capability to permanently scar a company – in fact, those that have been in the Bitcoin space long enough know that it’s best to store Bitcoins in your own wallet, rather than trusting exchanges long term.
Do Not Drop Your Guards Just Yet
Vogel does not believe that hackers have become weary of their trade. In his opinion, those guys do not run out of ideas. Rather, as traditional cyber security systems become more robust, hackers will continue with more creative ways to expose human weak points with phishing scams and other tricks to gain access to accounts. Therefore, it is not uhuru yet, if at all there will ever be. According to Vogel, crypto related scams, hacking incidents and data breaches will continue for many years to come. Therefore, users need to educate themselves about the best way to protect themselves and their funds online.
While crypto users must play their own roles to ensure proper asset protection, Vogel recognizes the evolution of the crypto exchange industry. He notes that the most popular and largest crypto exchanges have become hugely profitable. So what we are seeing nowadays is consolidation and transition from “crypto startup” to “crypto corporation”, and these larger exchanges are much more likely to properly invest in proper security tools.
In conclusion, Vogel remains a bit reluctant to qualify 2020 as a clean year for crypto heists yet. Although so far, it has been a relatively calm period for the industry when it comes to hackers, he believes that taking a cumulative assessment on the smaller occurrences across business platforms would provide a clearer perspective of the situation.
2019 was a record year, we’ll just have to wait and see what 2020 has in store. Although exchanges represent the largest reward for hackers and scammers, it’s accompanied with higher scrutiny. I certainly wouldn’t write off 2020 as significantly different than 2019; scams and hacks continue to occur daily, with a massive impact on people and businesses. For example, businesses hit by ransomware continue to be a huge epidemic, with impacts far greater than exchange hacking incidents.
Iyke Aru is a seasoned author and educator in the blockchain and cryptocurrency industry. He has been in the business of crypto content writing for many years with thousands of his articles across several platforms on the internet. Iyke is based in Nigeria where he stands out as one of the most informed and credible figures in the cryptocurrency industry. Outside blockchain and crypto, you will most likely catch Iyke playing or discussing football with friends and family.