Abu Dhabi, UAEMonday 17 February 2020

More than $11bn lost in cryptocurrency hacking since 2011, report says

The number of hacks peaked in 2019, causing a loss of more than $101 million

Technicians inspecting Bitcoin mining at Bitfarms in Quebec. AFP
Technicians inspecting Bitcoin mining at Bitfarms in Quebec. AFP

More than $11 billion (Dh40.37bn) worth of cryptocurrencies were stolen in different hacking incidents over the past nine years, according to a new report.

The number of hacks peaked last year, with at least eight establishments suffering breaches and losing more than $101 million, figures compiled by Inside Bitcoins, a London-based online news source for cryptocurrency showed.

However, the biggest heist was reported in 2014 with $6.68bn worth of cryptocurrencies vanishing in four different incidents.

“A significant amount was lost in cryptocurrency exchange hackings. Other affected platforms include wallets and mining platforms,” the report said.

The cryptocurrency market is huge, with more than 12,000 exchange marketplaces where crypto-assets like Bitcoin, Ethereum and other digital coins are traded. Account details, known as private keys in cryptocurrency parlance, can be hacked if not secured properly and the funds held in those accounts can be stolen.

The global market for cryptocurrency was valued at $574.3m in 2017, according to Transparency Market Research, a New York-based consultancy company, which forecasts the market will be worth $6.7bn by 2025 - growing at a compound annual growth rate of 31.3 per cent between 2017 and 2025.

The first hacking was reported in 2011 when Tokyo-based Mt.Gox lost around $17.2m. The hack was allegedly orchestrated from a “compromised computer belonging to an auditor within the firm”, said the report.

By January 2014, Mt.Gox was the leading Bitcoin exchange in the world and was controlling at least 70 per cent of all global transactions. However, the exchange suffered the biggest hack to date in February, 2014 – losing $6.5bn. The company running the exchange subsequently filed for bankruptcy.

Hackers are using a variety of techniques including phishing and viruses to steal a large amount of user data, Inside Bitcoins said.

“From the [incidents of] hacking data, it is clear that just like any other network, blockchain technology is [also] susceptible to hacking. This calls for collaboration between users and investors to minimise losses,” it added.

Blockchain, the technology behind cryptocurrencies, is a digital chain of transactions that are linked to each other using cryptography - a mechanism for secure communications - on an open ledger.

Last year, cyber criminals stole nearly 7,000 Bitcoins worth $60.5m from Malta-based platform Binance, one of the world’s biggest cryptocurrency exchanges.

“The hackers used a variety of techniques, including phishing, viruses and other attacks,” said Zhao Changpeng, chief executive of Binance, on the company’s blog while detailing the attack’s impact.

“The hackers had the patience to wait, and execute well-orchestrated actions through multiple seemingly independent accounts at the most opportune time. The transaction is structured in a way that passed our existing security checks,” he added.

Despite increasing incidents of breaches, industry experts expect more users will buy cryptocurrency in the coming years.

With more marketplaces supporting cryptocurrency payments, many consumers will switch to cryptocurrency accounts that are accessible by mobile, says US researcher Gartner. By 2025, 50 per cent of people with a smartphone but without a bank account will use a mobile-accessible cryptocurrency account, the research firm said.

Updated: January 22, 2020 03:27 PM

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