We are back again with more cryptocurrency information to discuss, but this time it’s all about Blockchain and security! Normally we talk about how to keep your computer secure, but frankly, some of the same disciplines we recommend can actually keep your Bitcoin secure, and you don’t need to be a geek to understand it. So, strap yourselves in, Blockchainers, there’s a whole dark currency that needs our attention.
By 2024 the market of cryptocurrency is expected to reach $9.6 billion dollars. That’s a lot of dough, and lately there have been a greater number of threats and attacks toward cryptocurrency wallets, the public and private keys used to spend or receive cryptocurrency. However, with lots of money, comes lots of theft, because everyone is human and people goof-up! Currently, the estimated number of Bitcoins stolen over the currency’s lifetime totals to a grand $15 billion dollars. A vast amount of this theft is due to investors not understanding how Bitcoin works and making choices that expose their investments.
Just like in the Looney Tunes show where Wile E. Coyote always tries to catch the Roadrunner, fake cryptocurrency wallets aim to trap investors. In the wise words of Roadrunner, “Meep! Meep!” He profoundly warns cryptocurrency investors of the many setups in the process of “cashing-out” or transferring cryptocurrency. These traps leave anonymous users exposed at the time of transaction and make other accounts at large scale crypto-wallets vulnerable. Keep reading, because we are going to tell you how your newly acquired Bitcoins will be stolen from you!
A Refresher Course on Blockchain
Created in 2008 by an entity known as Where’s Waldo, aka Satoshi Nakamoto, it was later implemented as the core of Bitcoin. If you read our article on cryptocurrency, You Don’t Know the Half of What “They” Don’t Want You to Know about Bitcoin, you’ll know we call Mr. Satoshi Nakamoto “Where’s Waldo” instead, because of his strange disappearance and high likelihood of enjoying horizontal stripes.
Simply put, Blockchain is a perpetually growing list that began with one block, the genesis block. In this visual, the genesis block is green! The black blocks are creating what is called the Main Chain and the purple blocks are Orphan blocks not included on the Main Chain. They are not included, because Orphan blocks are only temporary forks in the continuous Main Chain.
Now that you know the Blockchain structure, you are probably wondering what each block contains. Most people don’t know this, but each block holds different secrets of the universe. Just kidding! Each block holds encrypted codes, which allows Blockchain as a whole to serves as a leger, or record filer, keeping track of all transactions that occur on the network in order to solve the double spending issue. It would be pretty neat if these blocks could hold Earth shattering secrets, but practically unbreakable codes are cool too.
Numerous threats exist for Bitcoin investors when they want to secure their purchases, but did we mention that Blockchain has its own risks?
Threats to Blockchain
Blockchain is vulnerable to the 51% attack method, where if hackers gain control of more than half of the network’s computing power they will be able to prevent any new transactions or reverse ones they completed while in the network. Oh dear, this means they could double-spend coins! Actually, once a coin is created, it can’t be altered. So even with a 51% attack, there is no possibility of creating new coins out of old coins, or altering old blocks in the blockchain; therefore, there is not a high probability Bitcoins or any other crypto coins will be altered. So, it’s only minorly broken!
Another threat to blockchain is the development of quantum computers. The security features of Bitcoin that prevent theft or duplicates are based on mathematical functions, typically difficult to crack by classical computers. When buying cryptocurrency, the buyer generates two numbers, a private key and a public key, for their money. A public key can easily be made from a private key; however, it is extremely difficult to do it the other way around. Quantum computers will make this process of creating a private key from a public key much easier, thus increasing the probability of theft. There are hopes for quantum resilient solutions, but at the moment Bitcoin has not revised the system or announced plans to do so. Fair warning, oh Bitcoin sysops: apathy is the enemy of security. Now that we know the threats to Blockchain, let’s learn the hazards of cryptocurrency theft!
4 Common Ways Bitcoins are Stolen
The various ways cryptocurrency is stolen ranges from complex strategies of hackers to more simple mistakes investors have made themselves. The attacks occurring lately combine old and new techniques to target both enterprises and consumers. These four methods of attack all center around the REAL weak link in ALL computer security – the human element.
Time to go Phishing
The first way thieves attain your cryptocurrency private key through cryptocurrency wallets. Hackers will break into customers’ email accounts and reset the passwords, compromising the funds of said investor. The best way to combat this risk is by using two-factor authentication, which many Bitcoin storage services incorporate. These authenticators combine two or more attributes of people, like something they are or something they have, to create a more secure account.
Fraud & Fake Investors
The second way Bitcoins have been stolen is by individuals falsifying crypto-wallet companies and persuading investors to send their millions of dollars of cryptocurrency to them. This is one of the more elaborate schemes, because it requires hackers to set up websites and pass as an actual company.
The third way cryptocurrency is easily stolen is through exit scams, or pretending to offer goods and services online, accepting Bitcoin as payment, and then never delivering. Tying into how fake crypto-wallets can form, these companies can also use vanishing scams, where the website or service disappears from the internet, along with their victims’ Bitcoins. Moral of the story here: be extremely careful about the companies you choose to do business with.
The fourth way cryptocurrency is stolen is through threats against employees at real crypto-wallet companies. In one instance, an employee’s laptop at a Bitcoin mining service was compromised and the customers’ funds of NiceHash, a variant of Bitcoin, were emptied. The investors were not refinanced. Everyone was sad. Once again, choose your Bitcoin wallets wisely and be vigilant about who you share your private key with.
Keep a Chastity Belt on your Bitcoin – Security
Also, if you choose to print out or transfer a private key to a flash drive, put it in a safe or safety deposit box. The last thing you want to do it misplace it or have it stolen! Although many believe cryptocurrency and blockchain is the new future of secure money, the reality is that in its own infant stages there have been many issues. Is blockchain the most secure system for holding information? Right now, probably! For HOLDING it, but not for TRANSFERING it. The near future promises more complex technology that can jeopardize the cryptocurrency system. If you are planning on making cryptocurrency investments, remember to research what companies you work with and be cautious about where you keep your private keys! But… if you’re skeptical about Bitcoin (et. al) and refuse to invest, at least you can use this article to sound like a sanctimonious jerk around the dinner table.