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Cybercriminals have been causing data breaches ever since the internet was introduced to the world. However, the major problem with cryptocurrency data breaches is that transactions are irreversible.
As the network is decentralized and therefore trustless, there is no mechanism to differentiate between transactions made with legitimate coins and those that are made with stolen coins.
With being able to reverse a transaction, it makes it all the more important to protect yourself from cryptocurrency data breaches.
The Cost of Data Breaches
Some of the most significant data breaches to date have incurred huge losses for big names in the cryptocurrency world. They include:
- Coincheck – $530 million
- Mt. Gox – $460 million
- Parity – $275 million
- Bitfinex – $72 million
- DAO – $53 million
Coincheck was the victim of possibly the most substantial crypto data breach to date back in 2018. An unknown third party managed to gain access to an account and sent fraudulent emails to customers.
As many as 200 customers that replied to the emails from hackers had their data exposed.
This includes illegally obtained information such as names, contact addresses, as well as ID photos. According to an incident report,
“A third party who made unauthorized access (hereinafter, a third party) fraudulently sent some emails from our customers during the period from May 31 to June 1, 2020,” reads the report. “It turned out that [the domain name] was in a state where it could be acquired.”
How Cryptocurrency Data Breaches Occur
One of the best ways to secure your cryptocurrencies is to understand the ways in which they can be stolen.
Firstly, if a hacker gains access to your private key, they are able to send funds from your wallet somewhere else from anywhere in the world.
Phishing attacks are also a popular way to swindle people out of their crypto funds. Basically, a scammer uses one of many ways into tricking users into handing over their sensitive information. For example, a scammer created a fake Binance website where the letter “ẹ” was used in place of the regular “e.” The bogus website was pretty much identical to the legitimate website. However, it was designed to record and login information that was entered by users.
Other attacks, including theft from centralized entities, phone porting, copy-paste exploits, and the $5 wrench attack are also common threats for cryptocurrency users.
According to IBM, it takes as long as 279 days to detect and solve a data breach. Alternatively, in some situations, years have gone by before violations have been discovered. This was the case with dental and vision insurer Dominion International.
The company made an announcement regarding the nine-year data breach stating,
“On April 24, 2019, through our investigation of an internal alert, with the assistance of a leading cyber security firm, we determined that an unauthorized party may have accessed some of our computer servers. The unauthorized access may have occurred as early as August 25, 2010.”
How to Avoid a Cryptocurrency Data Breach
There are some steps that you can take to prevent a data breach. As a unique asset that allows thieves some anonymity as well as little to no chance of getting your funds back, it is essential to introduce the following practices to keep it from happening to you.
- Be sure to store your tokens and cryptocurrency offline, whether in a hardware or paper wallet
- Ensure that your private keys are secure offline
- Your private keys must be stored in a separate place from where your wallet is stored (secure offsite location or bank safe deposit box)
- Only use trusted bookmarks to access wallets, exchanges or online cryptocurrency providers within your web browser
- Use multifactor authentication with one of your options being an offline token
- Use a multi-signature method to access funds within your wallet
- Limit the amount of funds held at exchanges to only what you need in order to trade or exchange
Protecting Your Cryptocurrency from a Data Breach
Data breaches have set back some of the most prominent players in the cryptocurrency game millions of dollars.
This type of attack is a threat to anyone, but those dealing with crypto funds have a specific set of challenges when securing funds.
By employing proven methods, you can significantly decrease the chance of losing your hard-earned capital.