Key Takeaways
- Summarize crypto exchange hacking
- What safeguards can cryptocurrency owners take?
- What are a cold wallet and its functionality?
- What are a hot wallet and its uses it?
Bitmart Hack Briefly
Many anti-crypto advocates continue to stress the fact that the industry as a whole has a long way to go when it comes to securing itself in a fashion that is equivalent to the old finance system,
as regulatory uncertainty continues to plague the global digital asset ecosystem. With the recent disclosure of the Bitmart hack, these individuals have been given even more evidence.
To reiterate, on December 5, cryptocurrency exchange Bitmart was hacked, and the platform lost over $200 million because of a hot wallet compromise hosted
on the Ethereum and Binance smart chain blockchains. The breach was first disclosed by blockchain security startup Peckshield, whose cybersecurity team found that unscrupulous third parties were able to transfer around $100 million using the Ethereum blockchain, followed by a $96 million hack utilizing the crypto exchange’s BSC reserves.
The hackers were able to obtain over 20 tokens, Including Binance Coin (BNB), SafeMoon (SAFEMOON), Bsc-USD, and BNBBPay, among others (BPay). They also got their hands on a lot of meme tokens, such as Baby DogeCoin (BabyDoge), Floki Inu (FLOKI), and Moonshot (MOONSHOT).
The entire strategy, according to PeckShield’s security team, may be linked to a simple “transfer-out, swap, and wash” approach
Summarize crypto exchange hacking
According to Tom Robinson, Chief scientist of London- based crypto compliance startup Elliptic, the two major targets of crypto attacks right now are centralized exchanges and decentralized finance (Defi) services.
Hacking groups have been focusing on centralized exchanges for several years. These exchanges hold a user’s assets in “hot wallets,” or digital wallets internet-connected. This makes them more user-friendly, but it also makes them more vulnerable to skilled hackers.
One current example is the recent BitMart hack. According to Comparitech’s data, the Coincheck hack in 2018 saw around $530 million taken, making it the largest crypto robbery ever – until the Poly Network incident this year.
Defi services are a relatively new addition to the crypto realm. According to Robinson, Defi software applications eliminate exchanges entirely because they run directly on top of blockchain platforms, and hacks of these services are
typically caused by coding faults or issues with app design. Poly Network, as well as a more recent hack Badger DAO, a platform that provides users with vaults in which to store bitcoin and generate rewards, are two major examples. A total of $120 million was lost as a result of the Badger DAO hack.
What safeguards can cryptocurrency owners take?
Experts advise people to examine the size and quality of the organization behind a crypto wallet or exchange before utilizing it.
Do they have people in charge of cybersecurity? Is there a strong track record for the company? What is the company’s size? What is the total number of employees? All of these things indicate that you can have faith in the company’s ability to safeguard your money responsibly.
When accessing their cryptocurrency account, users can also take simple security precautions. Two-factor authentication or hardware keys, which are passwords stored on offline devices, are recommended by McGill.
He also suggests mandating approval for all cryptocurrency withdrawals and whitelisting addresses, which restricts crypto payments from being sent to specific addresses in your contact list.
Another technique to protect one’s crypto assets is to use a hardware wallet, known as “cold Storage,” Rather than using a service to store it. While this is the most secure method of storing crypto, it also places all the responsibility for storing private keys on the user.
There is no larger financial organization that can help if those keys are stolen or lost.
An offline wallet for storing bitcoins is known as cold storage. The digital wallet is stored in cold storage on a platform that is not linked to the internet, protecting it against unauthorized access, cyber hacks, and other vulnerabilities
that a system connected to the internet is vulnerable to. A hot wallet is a cryptocurrency owner’s tool for receiving and sending tokens.
There are no designated banks or physical wallets for storing cryptocurrency assets, unlike traditional currencies. Cryptocurrency wallets are software applications that are regularly used to store and manage cryptocurrency.
A hot wallet and a cold wallet differ in that a hot wallet is connected to the internet, whilst cold wallets are not.
What are a cold wallet and its functionality?
When a traditional bank’s checking, savings, or credit card account is compromised, the bank is able to reimburse the lost or stolen funds to the account holder. However, if your cryptocurrency account or wallet is hacked and your bitcoins are taken,
you will not be able to reclaim your funds. Because most digital currencies are decentralized and do not have the backing of a central bank or government, this is the case. As a result, a safe and secure mode of storage for bitcoins and altcoins is required.
Private keys kept in an internet-connected wallet are susceptible to network-based theft. Hot wallets are the name for these kinds of wallets. A hot wallet combines all the features needed to conduct a transaction into a single internet device.
The wallet generates and maintains private keys, then uses them to digitally sign transactions and broadcast them to the network. The issue is that after the signed transactions are broadcast online, an attacker crawling the networks could gain access to the private key used to sign the transaction.
By signing the transaction with the private keys in an offline context, cold storage overcomes this problem. Any online transaction is temporarily transferred to an offline wallet stored on a USB, CD, hard disk, paper, or offline computer, where it is digitally signed before being communicated to the online network.
Even if an online hacker came across the transaction, they would not be able to access the private key used for it because the private key does not come into contact with a server connected online during the signing process.
In exchange for the enhanced protection, transferring to and from a cold storage device is a little more difficult than transferring to and from a hot wallet.
A paper wallet is the most basic kind of cold storage. A paper wallet is nothing more than a piece of paper with public and private keys inscribed on it. The document is printed using an offline printer from the bitcoin paper wallet program.
A QR code is frequently inserted in the paper wallet or document so that it may be scanned and signed to complete a transaction. The disadvantage of this medium is that if the paper is lost, damaged, or rendered illegible the user will never be able to access the address where their funds are kept.
A hardware wallet is another type of cold storage that generates private keys using an offline device or smartcard. A hardware wallet that uses a smartcard to secure private keys is the Ledger USB Wallet.
The gadget looks and acts like a USB, and the private keys must be stored offline using a computer and a Chrome-based program. It’s important to keep this USB device and smartcard in a secure location, just like a paper wallet, because any damage or loss could result in the user losing access to their bitcoins. TREZOR and KeepKey are two more popular hardware wallets.
Finally, customers seeking cold storage options can employ offline software wallets, which are similar to hardware wallets but more difficult to use for non-technical people. An offline software wallet divides the wallet into two platforms: an offline wallet containing the private keys and an internet wallet containing the public keys.
The user’s address is sent to the recipient or sender on the opposite end of the transaction through the online wallet, which generates fresh unsigned transactions. The unsigned transaction is transported to the offline wallet, where it is signed using the private key. After that, the signed transaction is returned to the online wallet, which broadcasts it to the rest of the network.
Because the offline wallet is never linked to the internet, the private keys it stores are kept safe. In the crypto-economy, Electrum and Armory are frequently cited as the greatest offline software wallets. Because not all wallets support all cryptocurrencies, cryptocurrency users should make sure that the wallet they choose is compatible with the coins they transact or trade-in.
What are a hot wallet and its uses it?
There are a variety of reasons why an investor might desire to link or unplug their bitcoin holdings from the Internet. As a result, it is unusual for cryptocurrency users to have multiple wallets, including bot hot and cold wallets.
The main benefit of keeping cryptocurrency in a hot wallet is that it may be utilized to speed up basic transactions. Individuals who want to use their bitcoin assets to make purchases should use a hot wallet because their holdings will be transportable throughout the internet.
Hot wallets, on the other hand, are more prone than cold storage approaches to experience security difficulties or be hacked. A hot wallet poses more risk to the holder than a cold storage solution that is completely disconnected from the Internet ecosystem since it can access (and theoretically be accessible by) other sections of the Internet. A hot wallet, on the other hand, is not an insecure method of sorting cryptocurrency.
Before downloading and using a hot wallet, it is a good idea for an investor to do some research into its development. When it comes to developing wallets, developers have differing levels of experience, deaddiction to security and privacy, and goals in mind.
When it comes to updating their goods, developers will use several tactics. A hot wallet provider should, in theory, be constantly improving its product in response to how hacking attempts change and evolve.
A hot wallet’s safety and security are mostly determined by the user’s actions. Because the public and private keys are exposed on the Internet any objects stored in a hot wallet are subject to assault.
Because a hacker is less likely to break into a hot wallet for a limited number of tokens, experienced cryptocurrency investors will only maintain a tiny fraction of their holdings in them. For example, they may only store the amount in their hot wallet that they intend to spend soon.
They‘ll keep their leftover assets in cold storage until they are needed for specific deals. Some cryptocurrency inventors maintain their tokens in accounts linked to popular exchanges like Bitstamp or Poloniex.
These companies are considered hot wallet providers since they will hold your assets in their infrastructure. If a hacker gains access to one of Bistamp’s or Poloniex’s servers, an investor’s tokens could be lost If the hacker is able to breach their client accounts.
Because many of the main digital currency exchanges allow users to shift between fiat currencies and cryptocurrencies, it’s typical for people to have tiny amounts of different currencies in their accounts.
If they keep a large balance in any currency, they run the danger of attracting hackers’ notice or losing a significant amount of their holdings in the event of a heist.
