This post was written exclusively for Investing.com
- Hacking: already a clear and present danger for the cryptocurrency asset class
- A profitable business in Russia, North Korea, China, and Iran
- Ukraine situation could cause an increase in hacking as part of cyberwarfare
- Protect your accounts; be wary of scams
- Even vigilance may not protect your crypto assets
The goal of cybersecurity hackers is to come up with methods for breaching defenses and exploiting weaknesses in a computer system or network belonging to a government, business or even prominent individuals. Ransomware is a type of malware—that is software designed to disrupt, cause damage, or gain access to closed systems. Ransomware, more specifically, is a type of cryptovirology that threatens to publish the victim’s personal data or perpetually block access to it unless the victim hands over payment, i.e., a ransom, in order to stop the malicious action.
In 2021, the US experienced two well-publicized hacks. On May 7, the Colonial Pipeline, an American oil pipeline system that originates in Houston, Texas and carries gasoline and jet fuel to the Southeastern US, suffered a ransomware cyberattack that impacted computerized equipment managing the pipeline. In June 2021, JBS USA, a Greeley, Colorado-based subsidiary of Brazil's JBS SA, the leading beef supplier worldwide, paid $11 million to ransomware hackers who had breached the company's computer network.
Though technology has changed the world and improved lives, it has also, unfortunately, created new opportunities for criminals or hostile states to foment problems, disruptions, or worse, via cyber terrorists. Indeed, hacking is becoming more common and widespread. It's now even an integral warfare strategy.
Cryptocurrencies, which exist solely in cyberspace, could be ground zero for hackers looking to profit and governments looking to destabilize markets.
Hacking: already a clear and present danger for the cryptocurrency asset class
Mt. Gox was an international Bitcoin exchange headquartered in Shibuya, Tokyo, Japan. Mt. Gox began operations in July 2010, when Bitcoin’s price was below 10 cents per token. In 2013 and 2014, Mt. Gox handled over 70% of all worldwide Bitcoin transactions and was the leading global cryptocurrency exchange.
On June 13, 2011, the Mt. Gox Bitcoin exchange reported that approximately 25,000 Bitcoin worth $400,000 at the time was stolen from 478 accounts. An investigation led to a Russian Bitcoin exchange operator, Alexander Vinnik. From 2011 through 2013, it is likely that the Vinnik siphoned off more than 600,000 Bitcoins, causing Mt. Gox to ultimately suspend all trading and close its doors in February 2014. The total loss was estimated at 850,000 Bitcoins.
The computer hack caused a setback for the asset class. Many market participants abandoned cryptos because of the custody risk. However, as anyone paying attention knows, the digital currency asset class came roaring back.
Today, over 17,800 cryptos are available for trading and investing. Exchanges have learned from the Mt. Gox disaster, and many market participants hold their crypto stash in “secure” crypto wallets with proprietary passwords or keys. The 850,000 Bitcoin Mt. Gox lost to hackers were worth over $32.7 billion at $38,500 per token at the end of last week.
Meanwhile, hacking remains a clear and present danger for the asset class.
A profitable business in Russia, North Korea, China, and Iran
As digital tokens have appreciated, hackers have more incentive to steal cryptocurrencies.
While hackers in developing countries such as Nigeria, Bangladesh, Tunisia, and Liberia have stolen cryptos, the leading risks issue from Russia, China, North Korea, and Iran, deteriorating relations with the US, Europe, and other allied countries, could increase state-sponsored hacking into these countries.
Reports that North Korea’s leader Kim Jong-un has sponsored hackers that stole billions of dollars worth of cryptos prove that hacking is a profitable and destabilizing tool for countries at odds with the western governments.
Ukraine situation could cause an increase in hacking as part of cyberwarfare
Last week, Russian troops rolled into Ukraine, and the US and Europe began imposing sanctions on the Russian government and its oligarchs. The sanctions were an opening salvo. Western allies today ramped up additional sanctions as Russian troops bear down on Ukrainian capital, Kyiv.
Unlike warfare previously, today, the art of large-scale conflict is both conventional and unconventional. On Feb. 23, the day before Putin's troops began moving into the country, the Russian military hacked critical infrastructure in Ukraine’s capital.
While Bitcoin, Ethereum, and other cryptos could receive some support from Ukrainians looking to flee to other countries as cryptos make it easy to carry savings abroad, sophisticated government or individual hackers are likely to increase their activities, given the high worth of the tokens.
Stealing cryptocurrencies could become a significant part of cyberwarfare over the coming weeks, months, and years.
Protect your accounts; be wary of scams
I recently received a call warning that someone was tampering with my Coinbase (NASDAQ:COIN) account. The almost robotic voice asked me to press one in order to speak with an account executive who would assist me in securing the account and protecting it from hackers.
However, I don't have a Coinbase account. The call was an attempt at “phishing,” a type of cyberattack disguised as a common call or email providing a service or warning that's actually a weapon used against anyone who responds.
The goal is to trick the recipient into believing that the message is something they want or need to know. For instance, a request from Coinbase to help a valued customer. Those who provide information, click on a link, or download an attachment generally become victims of a ransomware attack or have their cryptos stolen from their accounts.
I recently heard a horror story about an MD in the US that had $100,000 worth of Bitcoin in a Coinbase account who fell victim to the same call. His Bitcoin was gone by the time he realized that the call requesting information had come from opportunistic hackers and not Coinbase.
Here are some key points to know about protecting your crypto and other valuable information from hackers:
- Do not open emails from unknown senders.
- Do not open documents unless you know the sender and confirm they sent you a document in an attachment.
- If an offer sounds too good to be true, assume that it is.
- Do not connect with any solicitations or calls from any party, even if you know the institution. If you are concerned, hang up and contact that institution to confirm they are trying to contact you.
- Keep your guard up and never share personal information over the phone, email, or via social media.
Even vigilance may not protect your crypto assets
Hackers will continue to use phishing techniques to steal cryptocurrencies from anyone incautious enough to be fooled. Ransomware could be an alternative ploy attempted as well. Ironically, criminal hackers often require payment in cryptocurrencies since they're more challenging to trace.
Assume that hacking will increase and that criminals will use more sophisticated techniques to access your tokens. Even if digital assets are in a crypto wallet with the key only available to you, hackers may still find ways to access the contents.
As we write this, cryptocurrency values have declined. However, over the past decade, each correction in the asset class has provided a buying opportunity, which eventually boosted tokens to new, higher levels.
Therefore, we could see Bitcoin, Ethereum, and many of the other over 17,800 cryptos rise over the coming months and years. However, custody and security remain a clear and present danger for investors and speculators holding the tokens.
Only invest what you can afford to lose as criminal hacking adds another dimension to the risk of the asset class. The hostilities in Europe only add to the potential for state-sponsored computer hacks to steal valuable tokens.