Securing Crypto: Understanding and Preventing Cryptocurrency Heists

NEW DELHI: Cryptocurrency trading is a lucrative investment option for people and also contributes to the growth of the economy. But the one downside of crypto trading is its vulnerability to hacking. Let’s take a look at some crucial facts related to major cyber thefts in the crypto world.
Since 2018 there have been five major security breaches with a total of $2021 million swindled by hackers, a BBC report says.
In 2018, two major crypto heists took place, where $146m was lifted from the Italian exchange BitGrail affecting 2,30,000 investors and $534 million was hacked from the Japanese exchange Coincheck. In the case of Coincheck, the affected investors were reimbursed.
Moving forward to 2020, $281 million was lifted from KuCoin by Korean hackers from the Seychelles-based exchange. However, the company managed to recover the stolen funds and refunded their customers.
In the year 2021, the greatest crypto heist took place with $610 million being hacked from the PolyNetwork, a DeFi platform in August.
However, this is the only heist where the hacker returned all the assets, enabling the exchange to reimburse the asset holders. This was followed by another major crypto heist worth $97 million in Japan’s Liquid exchange on August 19.
In all the above major crypto heists, the vulnerability points were the cause. Some exchanges have plugged the security loopholes, but hackers keep finding new ways to compromise the system.
There are exchanges which are basically websites that have inbuilt safekeeping vaults with digital blind doors, locks and keys and many more security features which are all blocks of information. But in recent times their safety has become questionable because they have been compromised in some instances.
In the case of the PolyNetwork hack earlier this month, the exchange had sent a letter to the hacker asking him to return the assets as they belonged to members.
PolyNetwork even offered $500,000 and immunity as a reward for returning the assets. This has raised questions if private companies had the authority to promise immunity from criminal prosecution.
In the United States, the FBI has already opined that private companies cannot give immunity, while in India, which is emerging as one of the top cryptocurrency markets, a bill to regulate cryptocurrency is taking shape.
Crypto investments in India grew from $923 million to nearly $6.6 billion between April 2020 and May 2021. Hackers will continue to exploit vulnerability points even in the future. It is the need of the hour to make vaults more secure, cyber safety experts say
The crypto asset market has grown into hundreds of millions of dollars. The transactions, transfers and safekeeping are to the tune of billions and need regulations either lawful or self-imposed regulations in a group of exchanges.
Seth Melamed, CEO of the Liquid Global exchange tweeted “There will be zero hair cuts. More announcements are coming soon. Again, this has been a humbling and painful experience but there will be no loss of customer funds”. Zero haircut is referred to as the return of money in terms of asset management.
The BBC report quotes financial analyst Frances Coppola as saying that cryptocurrency organisations must learn from their security breaches and infuse more security features into their systems.