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Beware of Cryptocurrency Hacks
Cryptocurrency is all the rage. Money you can’t see? Online accounts that aren’t regulated by big banks or even the feds? It has a futuristic feel, and anyone and everyone seems to be buying into the trend.
Lots of those folks who are buying up bitcoins by the hundreds claim cryptocurrency investment is the ticket to a richer tomorrow, but security experts think otherwise. They’ve repeatedly warned that all cryptocurrency is extremely vulnerable and at risk of being hacked – and that includes yours.
Is cryptocurrency the wave of the financial future, or is it really as risky as experts would have you think?
Before making your decision, read on to arm yourself with all the information you’ll need about cryptocurrency hacks.
How it works
Cryptocurrencies are decentralized and unregulated. That means there is no single country or institution controlling Bitcoin, Ethereum or Litecoin. These currencies are, consequently, extremely volatile and vulnerable to risk. Since all cryptocurrency transactions are processed online, a hacker can simply break into crypto exchanges, drain people’s wallets and disappear without a trace.
As you may expect, hackers have been following the meteoric rise of cryptocurrency and are eager to cash in on the prize. They’ve been systematically frauding the system for years, and have only gotten bolder over time. In the most recent major heist, hackers made off with an incredible $530 million in cryptocurrency from Coincheck, the leading Asian bitcoin exchange, this past January.
And experts predict that it will get worse.
An Ernst & Young report studied 372 preliminary coin offerings between 2015 and 2017 and found that more than 10% of the funds were stolen, amounting to as much as $1.5 million a month.
It’s not only individuals who’ve been defrauded; the report shares that huge companies have lost several million dollars on hacked cryptocurrency.
According to Chainalysis, a risk management software company for virtual currencies, more than 50% of these hacks occurred through phishing.
In other instances, hackers have modified malware to redirect bitcoins to their own wallets during a trade or purchase. This scam is particularly nefarious because the hackers snag the victim’s exchange credentials and login information so they can gain complete control of the mark’s bitcoin wallets.
By extension, this means the hackers have also accessed the victim’s credit card information and can do untold damage to their credit score while racking up huge bills in the victim’s name.
Any way you slice it, cryptocurrency hacks pose a major risk to all investors and users.
Who’s paying?
Nearly 20% of bitcoin investors purchase their cryptocurrency using a credit card – and almost 25% of them cannot pay off their credit card balance after making this purchase.
Some credit card companies are ready to throw in the towel on cryptocurrency. They’ve had their fair share of headaches caused by cryptocurrency hacks aimed at their cardholders, including disputed charges, fraudulent transactions and the inability to pay for large purchases.
Earlier this year, many major credit card companies, including Discover and Capital One, announced they will no longer allow cardholders to purchase cryptocurrencies using their credit cards due to the high level of risk and potential fraud associated with such transactions.
Lots of financial institutions have followed suit with similar announcements, claiming the increased volatility poses a loss to the institution, which may be forced to pick up the pieces for their member if a cryptocurrency investment or purchase is hacked.
Are cryptocurrency exchanges government-regulated?
The short answer is no. The very attraction of bitcoins and Ethereum is that they are decentralized, answering to no institution or government.
A little digging reveals that some foreign countries, like China, are actually taking stronger approaches toward protecting their citizens from cryptocurrency fraud and are coming down hard on all scammers and hackers.
For the average U.S. citizen, though, when it comes to cryptocurrency, you’re on your own.
Protecting yourself
Cryptocurrency transactions pose an extra risk by being absolutely final. There’s no way to cancel a cryptocurrency payment, back out on a purchase or secure an anti-fraud guarantee from a reputable financial institution. In case of fraud, you may be able to trace the computer that was used for robbing you, but it’s nearly impossible to identify the scammers that took off with your money.
In other words, by using cryptocurrency, you’re putting yourself at significant risk. There’s no one protecting you and no way to undo the damage once you’ve made a payment that’s been hacked.
The only thing you can do is take proactive steps to be as careful as possible when engaging in crypto-payments:
1.) Stick to established, recognized exchanges, like Coinbase.
Only use exchanges you’ve heard of, and only those that utilize two-factor authentication.
2.) Don’t store too much digital currency online.
It’s best to store your money as actual greenbacks in a brick-and-mortar financial institution. You can keep some cash in your wallet or even hoard it in a home safe, but be careful not to put too much in an online digital exchange.
3.) Keep your OS and security software up-to-date.
Always accept and install the most recent patches and updates when they become available. To ensure your system doesn’t fall behind, elect to have it update automatically.
4.) Be wary of suspicious emails and links.
Never share sensitive information over the internet, no matter how sincere or urgent an email or link may appear to be. Don’t download anything from an unverifiable source, and keep your spam settings working at their strongest capacity.
Cryptocurrency may be the dollar bill of the future, but don’t fall prey to the many criminals who are counting on consumer naivety to make a quick buck. Use caution and be on guard to keep your money safe!
Your Turn: Do you use or invest in cryptocurrencies? What precautions do you take against hacks? Share your own tips with us in the comments!
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Bitcoin is non-repudiatory and PayPal is not. This means that if I sell you my Bitcoin for PayPal, and you decide to lie that you didn't get the Bitcoins I sent you for the money you sent me via PayPal, you initiate a Chargeback , PayPal reverses that transaction but I can't reverse my Bitcoin transaction so I'm left holding the bag - you get to keep the money in your PayPal account and the Bitcoins I sent you.
Using PayPal to buy/sell Bitcoin violates PayPals terms and conditions so if I sell you my Bitcoin for PayPal, I risk getting getting my account closed or my funds frozen.
It's therefore easier for these exchanges to stop accepting PayPal.
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