It is widely known that cryptocurrencies on the blockchain are one of the safest ways to make transactions. That’s because everything is encrypted, and there’s no central point to attack by hackers. At the same time, being such a vast environment, a blockchain is almost impossible to break into, ensuring high levels of security to people’s wallets. For example, if you want to buy Ethereum on Binance, there would be no issue with transferring funds from your personal accounts onto a digital wallet and securing it due to a strong community that verifies and guarantees all transactions.
However, crypto theft can happen, although it takes some effort. There was a case of an exploited wormhole in 2022, and the equivalent of $326 million in Ethereum was stolen, leading to a lack of trust from investors. Still, cyber attackers hit other crypto sectors, such as DeFi. It seems like no online environment can ever be safe from the target of scammers, but users can be more cautious about handling their portfolios.
How is crypto stolen?
Technically speaking, there are two frequently used ways for scammers to obtain crypto: stealing or convincing a user to give it to them. Hackers achieve the first technique by exploiting weaknesses ― plenty in a blockchain, which is why Ethereum is doing so many updates lately. At the same time, hackers can get access to a blockchain’s hash rate if they own more than 50% of it.
Wallet hacks are some of the most challenging to tackle because if the private and public keys are lost or stolen, there’s no way for the owner to get access back to their assets. Still, a private key is almost impossible to hack, considering the complexity of the token, and it’s calculated that it would take centuries to guess the encryption behind it with modern technology. But they can be stolen because private keys are located in wallets, which location can be found in software apps installed on devices. These applications can be hacked; from there, getting a pass to the private key is only a matter of time.
Exchange hacks and their lack of trust
Crypto exchanges are important within the industry because they’re secure and provide a legal way to trade, invest and hold cryptocurrencies. While there are a few exchanges that rule the market, it’s safe to say that they also have a few problems and issues with ensuring trust among customers. People are more careful with their investments, at least since the FTX collapse, and users are turning to self-custody.
The reason why exchanges experience these hacks is that they hold crypto in reserve along with their private keys, making them the perfect target for hackers. This is why it’s best not to leave your private key on an exchange.
Other types of cryptocurrency scams
Scammers can get crypto from regular users in many ways, and they don’t differ too much from common online scams. For example, email phishing is frequently used, with hackers requiring login details or even pretending to offer prizes for an insignificant amount of money.
There are also investment scams, which are the most dangerous. In this case, hackers create a site and advertise it as true. Sometimes, their websites look so genuine that users don’t suspect they’re part of a scam and will simply use it to invest and trade their crypto but will be left with no assets and a page that’s not working after only one transaction.
Finally, romance scams are the old way of creating fake profiles and asking for funds, but this time in crypto. Some scammers will also urge victims to open a crypto account to help them, and sometimes they’re successful.
Cryptocurrency needs to be regulated to be safe
While there’s a lot of discussion around the subject of regulation in crypto, there’s not really much happening. Some countries try to bring these digital assets within a legal framework in their economies, but they’ve barely decided if crypto can be considered a security or commodity.
Governments have taken responsibility for anti-money laundering practices and counter-terror financing in the use of crypto, but there’s more to do. Interestingly enough, crypto taxation has been introduced, and users must abide by it. However, there’s an ongoing update in the terms, and there isn’t enough information about what they should do with certain digital assets.
The use of cryptocurrency would be safer with a thorough legal framework but without controlling it by a central authority because this eliminates their specific features and meaning. If crypto is centralized, it can be the subject of bias and interference, making things more complicated.
How can you secure your crypto?
While there isn’t 100% reassurance that your assets will be safe forever, there are things users can do to minimize the chance for their wallets to be hacked, such as the following:
- Storing your keys in a hardware wallet and avoid placing it on a mobile device with a connection to the Internet;
- Keeping your storage device somewhere safe without connecting it to a wireless system;
- Ensuring the devices you keep your keys into are in good condition, and updates are done frequently;
- Avoiding sharing the private key with anyone else, even if they’re trusted, because the more you talk about them on social media, the more you expose your wallet;
Another way of protecting your wallet and portfolio is to diversify your investments. If you only target Bitcoin and Ethereum, it may be possible for your assets to be in danger. Considering they’re the most important digital coins, they’ve been the subject of many hacking attempts, leaving investors with no other assets. Therefore, broaden your view and choose less-important cryptos that hackers do not target since they’re not valuable. However, they’ll keep your portfolio stable regardless of what happens.
Crypto theft is possible because hackers take advantage of users’ naïveté or weak points on the blockchain. For this to happen less often, there is an acute need for government regulation, but users must also better protect their investments.