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Cryptocurrencies have changed the world of finance today, offering investors unprecedented investment opportunities. The decentralized nature of cryptocurrency investments have made it a hot target for cybercriminals, resulting in a surge of exchange hacks. These incidents have left traders with significant financial losses and have cast doubts on the security and reliability of crypto exchanges. In this article, we have exposed some of the most noteworthy crypto exchange hacks that all crypto traders need to know about and why it is better to buy crypto on eToro and other highly secured trading platforms.
Top Eight Crypto Exchange Hacks All Traders Should Know?
Below are the top crypto exchange hacks that traders should be aware of.
Ronin Network hack:
In March 2022, the Ronin Network, powering the renowned Axie Infinity game, fell prey to an audacious hack, amounting to a loss of over $625 million. The hackers exploited a vulnerability in the network’s code, which allowed them to seize roughly 173,600 ETH and 25.5 million USDC, leaving traders astounded.
Mt. Gox (2014):
Mt. Gox – the famous Bitcoin exchange was hacked in 2014. The hack of this Japanese crypto resulted in the loss of over 850,000 bitcoins, equivalent to $450 million at the time. This further exposed the critical vulnerabilities in the exchange’s security and ultimately led to its downfall.
Coincheck, a prominent Japanese cryptocurrency exchange, suffered a colossal hack in 2018. The hackers stole 500 million NEM tokens, valued at $530 million at the time. This hack has been recorded as one of the most significant crypto exchange hacks in history.
Wormhole hack (2022):
In February 2022, the Wormhole bridge, facilitating asset transfers between Solana and Ethereum, experienced a jaw-dropping hack with hackers stealing over $325 million from the exchange. Here, the hackers exploited a vulnerability in the protocol’s code, which allowed them to mint counterfeit wrapped ETH tokens, which they exchanged as real tokens.
In September 2020, the well-established Singapore-based cryptocurrency exchange – KuCoin, faced a severe hack. The hackers managed to infiltrate the exchange’s hot wallet address, effortlessly siphoning off approximately
$280 million worth of various cryptocurrencies. The incident left traders in disbelief and raised serious questions about the exchange’s security measures.
Nomad Bridge hack (2022)
In January 2022, the Nomad Bridge protocol, facilitating asset transfers between Avalanche and Ethereum, suffered a serious hack valued at $190 million. The hackers exploited a vulnerability in the protocol’s code, which allowed them to mint forged wrapped ETH tokens.
The Hong Kong-based cryptocurrency exchange – Bitfinex was hacked in 2016. The hackers exploited the loophole discovered in the exchange’s multi-signature wallets, and stole over 120,000 bitcoins, valued at $72 million. Bitfinex had no choice but to share these losses among its users, with each account suffering a loss of nearly 36% of its holdings with the exchange.
Binance – suffered a major security breach in May 2019. Hackers managed to obtain a considerable number of user API keys, 2FA codes, and other sensitive information, granting them access to withdraw 7,000 bitcoins worth approximately $40 million from the exchange’s hot wallet. Binance
swiftly responded by covering the losses from its SAFU (Secure Asset Fund for Users), a commendable effort to protect users during such events.
Impact of Crypto Exchange Hacks
Crypto exchange hacks have far-reaching consequences for traders, the industry, and regulatory authorities.
- Loss of funds for affected traders
- Market volatility and impact on cryptocurrency prices
- Long-term implications for investors’ trust and confidence in the market
Trust and reputation
- Damage to the reputation of the hacked exchange
- Loss of trust from traders and the wider cryptocurrency community
- Efforts to rebuild trust through enhanced security measures
- Governments and regulatory bodies responding to hacks with stricter oversight
- Introduction of regulations to protect users and combat cybercrime in the cryptocurrency space
- Impact on the adoption and mainstream acceptance of cryptocurrencies
5. Preventive Measures for Traders
To mitigate the risk of falling victim to crypto exchange hacks, traders should consider implementing the following preventive measures:
Choosing a secure exchange
- Researching and selecting reputable exchanges with a strong track record of security
- Checking for industry certifications and security audits
Two-factor authentication (2FA)
- Enabling 2FA on exchange accounts for an added layer of security
- Utilizing hardware-based authentication methods like security keys
Cold storage wallets
- Storing a significant portion of funds in offline, hardware wallets not connected to the internet
- Protecting assets from potential online vulnerabilities
Regular security audits
- Exchanges conducting frequent security audits to identify and rectify vulnerabilities
- Users verifying the security measures and audits performed by their chosen exchange
Keeping software and devices up to date
- Regularly updating software, operating systems, and antivirus programs to patch security flaws
- Using reputable and up-to-date devices for trading and accessing exchange accounts
6. Insurance and Compensation
In response to the growing risk of crypto exchange hacks, certain exchanges now offer insurance policies to protect users’ funds in case of a security breach. Additionally, some exchanges have established compensation funds to reimburse users affected by hacks.
Exchange insurance policies
- Explanation of exchange insurance policies
- Limitations and coverage details
- Factors to consider when selecting an insured exchange
Compensation for affected users
- Overview of compensation efforts by exchanges
- Eligibility criteria and process for claiming compensation
- The importance of understanding an exchange’s compensation policy before trading
7. Regulatory Efforts to Combat Hacks
Governments and regulatory bodies have recognized the need to address the security risks associated with crypto exchange hacks. Efforts are being made to establish regulations and industry standards to safeguard users and enhance security practices.
- Overview of regulatory initiatives and legislation pertaining to crypto exchanges
- Compliance requirements for exchanges and user protection measures
- Balancing regulation with innovation and fostering a secure crypto ecosystem
Industry standards and best practices
- Collaboration among industry stakeholders to establish security best practices
- Development of guidelines and frameworks for exchanges to follow
- Encouraging transparency and accountability in the industry
The impact of crypto exchange hacks on the cryptocurrency industry cannot be underestimated. These incidents have raised valid security concerns and highlighted the urgent need for robust measures to safeguard users’ funds. Traders must prioritize selecting exchanges with a proven track record of security, such as the eToro trading platform and other reputable trading platforms.