One of the biggest crypto hacks, the Coincheck hack, ended up incurring a loss of $523 million. Read more to find out how the exchange failed to secure the funds of its users.
The common notion around cryptocurrency that makes it stand apart from the traditional banking system is its transparency, security, and decentralized nature. Users that get involved in crypto are ensured that their assets will remain safe in their wallets.
However, there have been a few attacks in the past that have made people skeptical about trusting cryptocurrency exchanges and storage. For example, the Coincheck Hack in 2018. Coincheck hack is regarded as one of the biggest crypto hacks in history. The checkers sent $523 million worth of NEM coins (XEM) to another address.
When Did It Happen and Who Was Involved?
Unknown hackers in Japan hacked into the Coincheck cryptocurrency exchange on Jan 26, 2018. The identities of the hackers that breached the security system are still unknown. The authorities involved led a detailed investigation but they were unable to retract the lost assets or the identities of those hackers.
Post Mortem of the Hack
Approximately, $500 million worth of assets were lost. Coincheck claimed at that point that they were making the best efforts to recover the lost assets. However, after the investigation was carried out, Coincheck admitted that hackers were able to get into their system because of a shortage of employees at that time. Due to inadequate security measures set into place, the hackers were able to execute their mission successfully.
Coincheck did not realize that their system was hacked until after a few hours. Later, the exchange used its capital to reimburse the losses of its 260,000 customers. And because of that Coincheck is rising again by improving its security practices. The reimbursement took some time but everyone was returned the exact amount that they had lost during the hack.
The Aftermath of the Hack
Although this hack shook Coincheck to its core, it also made many crypto exchanges realize that they need to fill their security gaps to ensure that the assets of their customers are kept safe even if there is a security breach involved in the future.
Similarly, Coincheck set a great example by being able to compensate for the losses of their customers. It was seen as a power move by their customers and potential customers.
This is why Coincheck is now regarded as one of the most active platforms on the internet today.
Impact on the Crypto Community
The crypto community was shaken by the Coincheck hack as it was considered as one of the biggest crypto hacks till 2018. The breach made users and companies insecure about their unshakable trust in the security protocols of crypto projects and blockchains. Similarly, it also alarmed other crypto exchanges to work on their security protocols to protect their assets from similar hacks.
However, people did not stop investing in cryptocurrencies after this attack. There has been a constant increase in crypto-related investment worldwide. Many businesses are now accepting it as a payment gateway.
These security breaches have also made people think of more ways to make sure that hackers do not attack these platforms. These security measures include face ID verification, biometric passcodes, and two-way authentication methods.
However, one can assume that the benefits of cryptocurrency outweigh these few hacks. Especially when the customers do not get to have the short end of the stick - in most of the cases the funds of the customers were reimbursed by the crypto exchanges.
Other Noteworthy Crypto Hacks
Apart from Coincheck, the crypto industry has gone through a number of hacks. The latest one is the Poly Network hack where around 160 million worth of assets were lost. The Poly Network uses lockboxes to protect assets, and they are released only after receiving permits from an authorized network.
However, the hackers were able to release the assets without having to provide authorized permission from another blockchain. On the bright side, they were not able to steal the whole amount. After an agreement, they kept around 2 million dollars and the rest (600 million dollars) was returned to the Polynetwork.
After some time, the users were reimbursed for their losses by the management of Poly Network. Since the majority of the loss was retracted, people are still invested in the project. Some other popular hacks include the BitGrail hack, Mt. Gox hack, KuCoin hack, CryptoCore/Lazarus hack, Africrypt hack, and Bitfinex hack.
How to Protect Exchanges From Hackers in the Future?
These hacks can be avoided by putting certain security checks in place by cryptocurrency companies or users. In regards to how hackers try to learn new techniques, companies can formulate new methods to ensure that no one can hack into their system. Even if through technical shortcomings hackers do get to infiltrate the system, the assets (coins) should not get released despite their several attempts.
Similarly, users can take security measures themselves to keep their assets secure by using cold wallets instead of hot wallets. A cold wallet is an offline storage system for crypto coins that cannot be hacked.
The users should not share their private keys with anyone and store them in a secure place. On top of this, using a trusted and reliable crypto exchange is vital. Moreover, you can use a VPN service while accessing your wallet to keep your transactions untraceable.
To Sum It All Up
Cryptocurrency is deemed to be more secure than the traditional banking system. This is the reason why so many people are attracted to it from the beginning. However, there have been many hacks and crypto scams that have raised concerns over the security offered by cryptocurrency exchanges.
For example, the Coincheck hack in 2018 and the recent Poly Network hack in 2019. However, the pros of investing in cryptocurrency outweigh the cons.
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