Cryptocurrency exchanges play a vital role in the growth and dissemination of digital coins and tokens. Without them, converting fiat currency into cryptocurrency would be more complicated, less secure, and likely, more costly. Exchanges are owned by different entities and operate in a relatively independent fashion. Due to the high volume of financial transactions passing through them, security is always a primary concern. This notwithstanding, attacks on cryptocurrency exchanges continue to take place each year.
Significant Cryptocurrency Exchange Attacks
Cryptocurrency attacks are far from the only type of financial platforms which are subject to cyberattacks. Banks, traditional exchanges, and eCommerce platforms are also continually bombarded. When an attack is successful, it normally ends up as front-page news. Here are some of the most notable attacks on cryptocurrency exchanges.
Binance Hack – 7,000 BTC
Binance is one of the world’s largest cryptocurrency exchanges, offering one of the greatest varieties of coins and tokens. What started out as a localised operation has grown into a global cryptocurrency empire with subsidiaries covering specific regions around the world.
The size and capabilities of this exchange are two of the reasons why news of a successful major attack in 2019 rocked the industry. In August 2019, Binance announced that hackers stole around 7,000 Bitcoin, equivalent to $40 million at the time (and worth around $376 million today).
This attack took place over an extended period of time and involved a variety of phishing, viruses, and other techniques. Hackers managed to penetrate into the accounts of several high net worth individuals and launch a coordinated attack that bypassed the exchange’s security systems.
Although several account holders were affected by the data breach, Binance committed to refund them all. This move was essential to calming crypto markets and maintaining community confidence in the exchange.
Mt. Gox – 80,000 BTC+
Mt. Gox is one of the earliest cryptocurrency exchanges, founded in 2010. At its peak, the exchange controlled around 70% of the world’s Bitcoin transactions, however, it ended up bankrupt as a result of its failure to protect itself and its users from cyber-attacks.
The first successful attack took place in 2011 when the exchange was in the process of changing its owners. 80,000 BTC, worth almost $4.3 billion today, were stolen. Craig Wright, a self-confessed Satoshi Nakamoto, took responsibility for this crime, although he was never proven guilty.
Mt. Gox suffered another attack just three months later when the account of the exchange’s original owner was hacked. The attackers were able to artificially lower the price of Bitcoin to just $17 and bought 2,000 BTC.
The final nail in Mt. Gox’s coffin when it was discovered that between 2011 and 2014, over 844,000 BTC were successfully stolen from user accounts and the exchange itself.
NiceHash – 4,736 BTC
NiceHash is a platform that lets users assign extra GPU power to mine Bitcoin and Altcoins. In 2017, hackers accessed a NiceHash engineer’s account and managed to transfer the funds stored in the platform’s hot wallet. Most of the stolen funds were eventually refunded, and the co-founder was arrested for potentially playing a role in the hack.
How to Protect Yourself from Possible Exchange Attacks
As a registered exchange account holder, you can do little to control the security of the platform. However, by taking the right decisions, you can significantly reduce the chance of having your account hacked and cryptocurrency stolen. It is also advisable to read up reviews online. For instance, there are guides like Coinbase exchange review and other resourceful information online that lists down the credibility of each exchange. Here are additional tips to help you stay secure:
- Choose a secure cryptocurrency exchange – Although any exchange could be hacked, some are clearly safer than others. Coinbase, for example, is one of the world’s safest cryptocurrency exchanges. Not only has it never been successfully hacked, but it also offers insurance against funds lost as a result of fraudulent activity. Check out this Coinbase exchange review to learn more about the best exchange for beginners.
- Watch out for phishing attempts – Whilst exchanges may contact you from time to time, they will never ask you to provide sensitive information, such as your password or pin code. If you do receive an email from an exchange requesting urgent action on your part, do not click any links. Instead, open your web browser, enter the exchange’s web address manually and log into your account.
- Do not store unnecessary funds in your exchange account – Numerous cryptocurrency exchanges offer free wallets, but these are vulnerable to attack. Known as hot wallets, they are continually online so are easier to hack. You should only store funds you plan to use imminently in such wallets. Store the rest of your funds in cold wallets, which are not continually connected to the Internet, and are, therefore, almost impossible to hack.
Keeping your funds safe is your responsibility. As you’ve seen in the examples above, successful attacks can take place in even the biggest cryptocurrency exchanges.