Cryptocurrencies particularly Bitcoin with its decentralized nature and lack of regulation has given a free hand to developers in designing and developing crypto exchanges the way they want. This has led to a lot of security vulnerabilities which hackers have exploited in the past 12 years. Through this article we would like to make sure that investors and traders in cryptocurrencies know how hacks have happened in different exchanges and thus know the importance of securely storing their hard earned crypto assets.
Types of Hacks
These are some of the methods used by hackers to hack different crypto exchanges over the last decade.
- Use of stolen credentials
- Abuse of functionality
- Exploit the existing vulnerabilities
- Use of backdoor
- Privilege abuse
For some of the exchanges the methods used are unknown (not disclosed by exchanges). We think exchanges have a moral obligation to fix the issues after a hack and make the method public so that current customers get confidence on the exchange they are using.
Use of stolen credentials
Abuse of functionality
Exploit the existing vulnerabilities
Use of backdoor/Privilege abuse
Why cryptocurrency exchanges?
Bitcoin has become the best performing asset in the history of world finance and will continue to do so considering the rate of money printing by central banks and rising inflation. Cryptocurrencies can be fed to mixers to remove the trace and can be sold across the globe. Due to these reasons hackers will find out more innovative ways in the future to hack the crypto exchanges as it gives them direct access to decentralized assets. This is much more lucrative and less risky when compared to hacking a bank’s digital vault.
What can we do about it?
In case you are not a daily trader, safest method to secure your crypto assets is to store them in a non-custodial wallet.In a non-custodial wallet, you have sole control of your private keys, which in turn control your cryptocurrency and prove the funds are yours. With a custodial wallet, another party controls your private keys. Most custodial wallets these days are web-based exchange wallets. The biggest risk involved with non-custodial wallets is the chance of loosing the private keys. By looking at the history of hacks that have happened in exchanges, we can take that risk and mitigate it by storing the private keys in locations that you feel are safe (both in digital and non-digital formats). Blockchain gives us a change to be financially autonomous and responsible for the first time in the history of world economics and we should not shy away.