Security Challenges in Crypto ExchangesBitcoin was first introduced in January 2009, founded by Satoshi Nakamoto. Even now the information present on Satoshi Nakamoto is Obscure. The very idea for the use of bitcoin was for Dark Web trading/Dealings. Soon after 4 years, there was rise seen in bitcoins. Common people came to realise its existence.
The investment was made in bitcoins so that it gains a platform among the crowd. It actually worked, people started buying and selling bitcoins. There were two major reasons for this sudden rise of bitcoin. A limited number of bitcoins specifically 21 million only. The other reason was no taxation was being pressed by any government institute whatsoever.
When bitcoin was introduced to the public sector, the potential that it gained was nothing less than a miracle. Presently, In the year 2017 bitcoin shook the world by storm. Companies started launching their own bitcoins. Countries like Japan even launched their own cryptocurrency known as “J coin”. Bitcoin became a primary financial source for North Korean. One of the crucial drawbacks of cryptocurrency is the security it consists while crypto exchange takes place. On 19th of December 2017 a South Korean exchange known as Youbit operated by the team at Yapian that had to suspend their trading after the attack.
Resulting in the downfall of 17% of their assets. They had to file for bankruptcy. This was not the first attack. Back in April of the same year, there was a security breach. Coinbase also suffered from many cyber attacks. Recently in December 2017, there was some price correction due to some internal trade between company employees.
An Investigation was also launched. Another security loophole is the wallet that holds cryptocurrencies. There are numerous cyber attacks on crypto wallet resulting in the theft of that individual bitcoin. Japan-based bitcoin exchange Mt.Gox operating since 2010 which was the biggest bitcoin exchange in that time. It was hacked twice.
The first one took place in June 2011. The hacker was able to get hold of Mt.Gox’s auditor’s credentials. A transfer of 2609 bitcoins to an address for which Mt.Gox had no keys leading to the suspension of Mt.Gox operations for several days The second attack happened in 2014, at a time when Mt. Gox consisting of almost 70% of Bitcoin transactions in the world. This time, the leaked BTC amount was immense enough to completely sink the business of Mt.
Gox. Soon after that, Mt. Gox stopped operations. Later filed for bankruptcy, stating that more than 750,000 BTCs (around $350 million) were missing from the exchange. Investors lost their funds. Bitfloor another old-time Bitcoin exchange was hacked in 2012. Hackers were able to get a hold of the unencrypted private keys that were stored online for backups.
The amount was “small-scale” a total loss of 24,000 BTC. BitFloor was closed due to bank regulatory measures as stated by its founder. Poloniex is the busiest exchanges of Bitcoin and altcoins. It was hacked in the summer of 2014. Basically, the hackers were able to exploit a faulty withdrawal code of Poloniex.
For damage control, Poloniex suspended operations. The company stated in their forum that funds of all Poloniex holders would be reduced by 12.3%. This was done because many users would have simply withdrawn their funds and there would have been none left for the remaining 12.3% of owners.
Bitstamp an alternative to Mt.Gox founded in the year 2011. It was hacked on 4th January 2015 by an anonymous hacker and 19,000 bitcoins (worth of $5 million) were lost. Soon after the incident, Bitstamp suspended operations.
Bitfinix second largest Bitcoin hack ever made after Mt.Gox. The breach claimed 120,000 BTCs (worth $72 million). This hack took place In August 2016. It happened because attackers were able to exploit a vulnerability in the multisig (Refers to requiring of more than one key to authorize a bitcoin transaction) wallet architecture of Bitfinex and BitGo. No system can be made or achieved having zero vulnerabilities.
But what can be done is the rectifications of these flaws. -Aadesh Gindodiya