cryptodailytrading.com

Top 3 Biggest Bitcoin Hacks and Frauds in History

  • Vera Thornpike
    ⭐ Features

    What’s the biggest Bitcoin hack in history? How did Bitcoin hackers manage to steal millions of dollars from investors? How can you prevent having your Bitcoin hacked?


Top 3 Biggest Bitcoin Hacks and Frauds in History
You may also like:
Contents

During the 10 years of its existence, Bitcoin has made waves and has grown in price tremendously, peaking to $20,000 in December. Potential investors couldn’t stay indifferent – all in all, Bitcoin has become one of the most profitable assets ever. However, high profits are always associated with high risks and frauds. Has Bitcoin ever been hacked? Yes! Despite the fact that blockchain is a highly secure technology, digital fraudsters invent new ways of disrupting the system.

Here are the biggest Bitcoin hacks that took place recently.


Bitcoin Savings and Trust

This is the biggest and the cruelest Bitcoin hack ever. The company performed a classic Ponzi scheme: it attracted Bitcoin investors by promising them 7% profit per week, which would result in 365% in a year. It gathered 500,000 BTC before disappearing in August 2012.

Enraged investors managed to sue the company, and a year after, the judge ordered Tendon Shavers, its founder, refund the investors over $40 mln. In 2012, the sum of fraud equaled $6 mln, but in a year it grew to $500 mln because the BTC price was about $100. Turns out, the organizer still managed to make big money even after paying reparations.

Mt. Gox: Bitcoin Hacked Twice!

This Bitcoin exchange based in Japan has a notorious reputation due to being hacked twice – in 2011 and 2014. That’s a rare occasion: no other exchange website suffered from Bitcoin hackers twice. The platform started operating in 2010 and quickly made its way to the top. But in a year, everything changed.

In June 2011, a security breach of the website allowed hackers to drop the price of BTC to $0.01. Then they used a compromised computer belonging to a Mt. Gox auditor to steal a huge amount of Bitcoins. As soon as the transfer was finished, the initial BTC price was restored. The operation took a few minutes only and cost Mt. Gox $8,750,000 back then.

Mt. Gox is the number one BTC failure ever
Mt. Gox – one of the biggest Bitcoin hacks in history

 

Bitcoin got hacked again in February 2014, when the platform was the biggest Bitcoin exchange and processed about 70% of Bitcoin transactions. Hackers caused technical issues on the Mt. Gox website, and it was suspended for one month. That made Bitcoin’s price fall by 36%: it made Mt. Gox lose about 850,000 BTC after the attack, which equaled $473 back then. After this cryptocurrency collapse, the company had to declare itself bankrupt.

Investors lost their money and did not receive any refunds.

Bitfinex

Although Bitfinex is one of the largest cryptocurrency trading exchanges on the market, it also has had problems in the past. In August 2016, hackers attacked the platform by using the vulnerability of its Multisig wallet architecture and stole 120,000 BTC. Because of this hack, Bitcoin dropped in price from $607 to $515 in a few hours.  Luckily for traders, the company refunded almost the whole sum using its BFX tokens exchanged for USD.

Estimated to be worth $72 mln, this is the second biggest Bitcoin exchange breach after Mt. Gox.

👉MUST READ Bitcoin Mining Difficulty Drops Significantly — Will it be Enough to Entice Miners Back?
Bitcoin Mining Difficulty Drops Significantly — Will it be Enough to Entice Miners Back?

Other notorious cases

Mt. Gox, Bitcoinica, and Bitfinex aren’t the only exchanges to have had Bitcoin hacked. Here are some other cases in point.

How was Poloniex hacked?

Another biggest cryptocurrency exchange platform, Poloniex, was hacked in 2014. The company didn’t disclose the exact number of coins lost, but a more detailed explanation of this BTC hack was posted on the Bitcointalk forum.

How did the Bitcoin hacker manage to do that? It was simple: hackers exploited the faulty withdrawal code of Poloniex. In comparison with Mt. Gox’s accident, no other Bitcoin hacking seems to be so terrible. However, the outcomes affected all Poloniex users.

Soon after the attack, the platform suspended all operations temporarily and declared on its forum that funds of all Poloniex users would be reduced by 12.3% of all BTCs (97 BTC). It was done to protect users: had all customers withdrawn their funds altogether, there would be nothing left for the rest 12.3% of traders. Eventually, those who lost their money were repaid by the company – it was verified by the customers.

Hackers attack Poloniex quite frequently
Poloniex often becomes the target of hackers, but most attacks are mitigated successfully

 

The rumor goes that another Poloniex hack took place in 2017, but the official representatives did not confirm that. Even if the Bitcoin hack did occur, Poloniex continues delivering a sufficient level of service quality.

Bitcoinica: 61,000 Bitcoins hacked

This platform was attacked in March 2012, when Bitcoin was about $5, so the total loss was about $215,000.

Hackers found a vulnerability in the shared online web host Linode and managed to steal about 46,700 Bitcoins from Linode users. The majority of the funds (43,000 BTC) was stored in Bitcoinica exchange platform.

The second attack on Bitcoinica was made 2 months later: hackers stole 18,000 BTC. That finally sank the company and it declared itself bankrupt.

Bitstamp: hacked but recovered

The Slovenian-based startup was established in 2011 to be a safer alternative to Mt. Gox. However, it appeared to be a poor alternative because of the Bitstamp hack that took place in 2015. An anonymous hacker stole 19,000 bitcoins (worth of $5 million) from Bitstamp’s operational hot wallet.

After that, the company suspended its operations and posted the following notice:

The statement of Bitstamp’s representative after hacking
That’s what Bitstamp users received after hack

Today, Bitstamp still operates and even managed to get back some of its previous users. After the attack, it took drastic measures to boost security, including the introduction of BitGo multisig wallets for operational purposes.

Bitfloor

This cryptocurrency exchange platform was hacked in 2012: hackers accessed unencrypted private keys that were stored online for backups. At that time, loss of 24,000 BTC wasn't dramatic, and the company managed to refund customers. However, it closed soon due to regulatory measures, as the founder stated in 2013.

Here’s a breakdown of Bitcoin hacks taking place throughout the history of its existence:

Breakdown of Bitcoin hacks
Bitcoin hack, minor and major

 

How to avoid a Bitcoin hack?

All of the above-mentioned cases show that mostly those exchange platforms are to blame for the financial loss; security breaches are found at the application level. The blockchain itself is failure-proof, but the websites where transactions take place rely on different programming languages and technologies. Does it mean you cannot prevent Bitcoin fraud?

No, but you can protect your digital assets in the following way:

  • Register on reliable and trustworthy platforms only. Read customer reviews, visit forums - find information about the digital security of platforms and their history. 

  • Find out which security measures are taken by the exchange platform: SSL encryption, multisig wallet, and other high-grade technologies are important for keeping website secure.

  • Store your cryptocurrency on a cold wallet. This is a piece of hardware that ensures rock-solid protection of digital funds because the private keys are available for the wallet owner only. It looks like a USB drive and doesn’t take much place – you can access your funds anytime and anywhere using your PC. Nobody can hack a Bitcoin wallet that’s not accessible online.

  • Don’t perform cryptocurrency transactions via public Wi-Fi and insecure connections – your traffic and, consequently, wallet address, can be compromised this way.

  • Do not let anyone know your private keys and login credentials. Don’t set this information on social messengers and email.

  • Whenever you copy and paste the Bitcoin wallet address, double check its correctness. There's a malware that can alter the wallet number when you paste it in the wallet field during transactions. If your device gets ‘infected’ with such malware, you will send cryptocurrency to hackers instead without being aware of it.

  • Set up 2-step authentication on your account. Use the solution from Google or AUTHY application. Such practice usually means an SMS confirmation of login. This way, you will know whenever someone attempts to access your account.

Cold wallet – bulletproof protection of crypto assets
With a cold wallet, your crypto savings will be safe & sound

 

Bottom Line

Can Bitcoin be hacked? These examples show that everything is possible: unsleeping hackers keep finding new ways of compromising the security of crypto exchanges and the PCs of investors. As soon as developers detect vulnerability and eliminate them, malicious programmers find out how to hack Bitcoin in a different way. Therefore, you should always be on the guard.

Bitcoin is not just a good investment opportunity - it's bait for investors that is masterly used by cybercriminals. Don't let anyone steal your hard-earned Bitcoins – take all possible security measures and don't mess up with such exchange platforms as mentioned above.

Cover image via u.today
Only the most important posts per day. Infographics, analytics, reviews & summaries. Join our Telegram channel!
👓 Recommended articles

Question of the Day: Can Stablecoins Accelerate Cryptocurrency Adoption?

  • Yuri Molchan
    ⭐ Features

    Stablecoins show hardly any volatility compared to Bitcoin and altcoins, many are hoping that they will be able to bridge new crypto economy and regular fiat money


Question of the Day: Can Stablecoins Accelerate Cryptocurrency Adoption?
You may also like:
Contents

Bitcoin, the father cryptocurrency, emerged in hope that it will remove all intermediaries in electronic commerce that cut off their share of payments. BTC was perceived as a P2P way to replace fiat cash in an electronic format, which would enable one party to pay another without any financial institution or payment platform which would demand its share of a transaction as a reward for its services.

What is wrong with Bitcoin

For quite a while Bitcoin was performing the way the crypto community expected. But the situation changed later – BTC rate became weaker, thus bringing down its financial and economic reliability, when it gets to be used as a regular means of payment.


You cannot have a currency that would cost like a British castle today, a gram of gold – tomorrow and a pack of French fries the day after.

At that point practical fintech minds came up with an idea of creating something which would become a breakthrough in the universe of crypto – a so-called stablecoin.

Will stablecoins solve the volatility problem?

Technically, stablecoins are protected from the volatility roller-coaster that Bitcoin and other cryptos love to ride. They are programmed to keep their prices stable and investors now are largely attracted to this new type of digital assets.

Stablecoin does not show any volatility in its monetary value, since it has a fixed connection to an asset it is pegged to. The major goal of using stablecoins is taking the best from decentralized crypto coins and combining it with a constant value. Thanks to it, stablecoins can be used as a reliable means of trade.

Asset-pegged stablecoins

Asset-backed ones get their value from an asset as can be understood from the name. An asset provides the necessary value to a coin, as well as the necessary legitimacy.

A great example of an asset-pegged stablecoin is Tether (USDT). In spite of a series of scandals at the end of last year, it remains the most popular stablecoin in the crypto market.

Recently, it has partnered with the Tron Foundation to launch a Tron-based stablecoin.

Other examples are TrueUSD (TUSD), USD Coin (USDC), the Gemini Dollar (GUSD), and the Paxos Standard (PAX). They are all pegged to the USD.

Crypto-backed stablecoins

Some digital coins work in a similar way to fiat-backed ones, however, they are pegged to collateral crypto. That means that crypto assets that ensure the value of such stablecoins are stored in a wallet similar to escrow.

A good example of a crypto-pegged token is Maker, which is ranked 16 on CMC.

Algorithmic stablecoins

Even though, stablecoin can be interesting at first thought but the way they are built goes against the principle of decentralization that crypto coins have as a foundation. Thus, many crypto fans and evangelists are positive that stablecoins must be linked towards not a centralized asset but a computer algorithm which takes value from a balance between supply and demand.

Basis is now considered the most promising algorithmic stablecoin of all.

👉MUST READ John McAfee Says Exactly When Bitcoin Will Hit $1 Mln, IBM’s Jesse Lund Goes for More Modest Forecast
John McAfee Says Exactly When Bitcoin Will Hit $1 Mln, IBM’s Jesse Lund Goes for More Modest Forecast

Can stablecoin ensure smooth future for the crypto industry?

The primary goal of all crypto assets was and remains to come up with virtual asset that would be liquid enough and not vulnerable to market volatility. From this point of view, stablecoins are a dream of all crypto fans and evangelists of a decentralized economy.

Apart from the potential to conduct crypto transactions smoothly, experts believe it can bridge the two worlds – fiat and crypto, bringing them a mutually beneficial coexistence. However, that may take time.

Cover image via u.today
The fastest way to get crypto news is to follow our Twitter. You won’t miss a thing! Subscribe.
👓 Recommended articles