People and organizations that participate in cryptocurrency exchanges are extremely interested in security measures. That’s because the high value digital currency is especially attractive to cyber criminals. Of course, being vulnerable to attacks can be calamitous to participants. That’s why it is important for investors to understand the top hacks and security concerns about cryptocurrency.
Cryptocurrency Exchange Vulnerability
Cryptocurrency exchanges are the online platforms where participants can exchange funds. Hackers are always looking to manipulate code to intercept these trades. When there are errors in the code or other vulnerabilities, it’s possible to experience a breach. When the hackers successfully exploit a vulnerability, funds can be drained with little ability to react quickly.
Historically, there have been many successful hacks of cryptocurrency exchanges, which range from recognizing and using programming mistakes to taking advantages of security lapses. From the earliest successful hack of Mt. Gox in 2011, to the current day, it’s a given that hackers will continue to frequently direct attacks at cryptocurrency exchanges due to the large number of coins in their possession. Developers should take all possible precautions when testing security measures to preserve the exchange’s integrity, and users should carefully consider the safety of leaving cryptocurrency on vulnerable exchanges.
Cryptocurrency hardware wallets, the small electronic devices that facilitate the storage and use of the private keys that secure cryptocurrencies, are packed with security features. Unfortunately, hardware wallets can still be exploited by hackers. For example, a hacker managed to interfere with the insecure micro-controller located within a hardware wallet to install malware. A security breach like that could leave an investor’s cryptocurrency funds vulnerable to theft.
As the technology for digital wallets improves, manufacturers work hard to stay one step ahead of hackers who are targeting the devices. They will continue to include better tamper-resistant features that keep funds safe within the wallets. However, one of the easiest ways to ensure the safety of your hardware wallet is to only purchase them direct from the manufacturer, or authorized retailers, and to check the packaging for any evidence of tampering.
Mining is the process that verifies cryptocurrency transactions and adds them to the public digital ledger, called a blockchain. As the name implies, selfish mining happens when a miner (or a mining pool) chooses to hold off publishing the block they have just mined until it is to their advantage.
With selfish mining, they hide the block from others by failing to broadcast it, and get straight to work on the next block. This gives them a significant advantage over other miners as they develop the longest chain and they reap the rewards when they broadcast it. Once the selfish miners chain is broadcast and becomes the longest chain, other blocks become orphaned or invalidated.
51 Percent Attacks
Mining pools allow miners to consolidate their resources and increase their power, but this power can be misused in the form of 51 percent attack. When a mining pool has enough hashing power, they can manipulate and control the network’s mining power. They can disrupt cryptocurrency transactions and make some things happen in their favor. This disruption in the network makes it insecure and the mining pool could cause problems such as double spending or even reverse transactions. While it can be difficult and expensive to organize and carry out a 51 percent attack, it has been done before and should be considered a possible threat with cryptocurrency.
Hacks and security concerns are simply a part of cryptocurrency and developers must work hard to stay ahead of cybercriminals that are actively looking for ways to access valuable coins. Unlike financial activity that happens in a traditional financial institution, cryptocurrency transactions are difficult to reverse due to their nature. Because of the increased risks of cyberattacks, expect to see continual increases in security technology and strategies.