As the popularity of cryptocurrencies grows, it is only natural that hackers become more attracted to the potential profits from cryptocurrencies. This resulted in 2018 breaking records — in a bad way — for crypto exchange hacks. Around $1 billion in total was stolen from exchanges during 2018, with the total just under that mark by mid-December.
The figures regarding cryptocurrency exchange hacks in 2018 were completed in late December, so they only include most of the year, not all. Even so, they were stunning. As of December, $865 million had been hacked, with the total all-time hacks on crypto exchanges equaling losses of $1.5 billion. When calculated down, these figures average out to about $2.7 million being stolen from exchanges every day. Breaking that down further gives you $1,860 lost every minute. To put that in perspective, 2018’s figures for daily average theft from exchanges are 13 times that of 2017.
The year started off on the wrong foot with about 500 XEM coins stolen from Coincheck’s wallet in January. The coins stolen from this Tokyo-based exchange were valued at around $532.6 million at the time. This meant the hack broke the previous record set by the Mt. Gox hack where 850,000 BTC disappeared.
In February 2018, BitGrail lost 17 million Nano (XRB) to hackers. This was valued at about $170 million at that time, from this Italian crypto exchange. There is still some controversy over this particular hack, with some feeling that the hack was actually an exit scam.
Moving up to April, Ian Balina made headlines for a far-from-happy reason. During a live stream, he was hacked with about $2 million in tokens stolen. In June, Coinrail, a South Korean exchange, lost over $40 million in crypto from a hack. Also in June, the South Korean exchange Bithumb lost about $31 million worth of crypto due to security issues. Other hacks in 2018 included the one affecting Zaif for $60 million, one impacting MapleChange for an unknown amount, one impacting Trade.io for $8 million, and the SIM swap method in November that lost millions of dollars.
The good news is that although the hacks were significant in 2018, we at least learned a few very important lessons. One of the biggest lessons was that exchanges have to deal with systematic risk. The simple fact that exchanges store billions of dollars’ worth of cryptocurrency makes them a target for hackers. Hackers find it not only more profitable but also less risky to hack an exchange instead of robbing a bank. Additionally, exchanges focus on their fintech roots, which unfortunately puts security second.
We also learned that hacks have gotten more sophisticated. While security measures on crypto-exchanges evolve, hackers also evolve their techniques. In 2018, there were numerous state-of-the-art attacks, including social engineering.
The most important lesson we learned from the hacks in 2018 is that we must take steps for security. Exchanges need to make it a priority and we, traders and investors, must take our own precautions. From using secure passwords to storing minimal funds on exchanges, there are multiple steps you can take to reduce your risk of being impacted by future hacks.