Cryptocurrency theft is rising – here’s how to protect yourself
The rise of decentralized finance and the crypto economy gives criminals many lucrative opportunities.
Early in February 2022, news emerged that about $326 million Ethereum tokens were stolen from a blockchain bridge. This connects two separate blockchains so that crypto can get exchanged between them.
Some might be surprised to learn that crypto crime is steadily rising, especially once the pandemic hit. How does theft occur on the blockchain, and how can you stay safe?
Scams vs. Direct Theft
Criminals can get cryptocurrency by stealing directly or using schemes to trick others into giving it to them.
Cryptocurrency criminals directly stole about $3.2 billion worth of crypto in 2021, which is a five-fold increase from the year prior.
However, schemes continue overshadowing outright theft. Scammers lured about $7.8 billion worth of crypto from victims.
Overall, crypto crime is a growing enterprise. The rise of decentralized finance and the crypto economy gives criminals many lucrative opportunities.
Though the numbers are staggering, that’s only half the equation. Many people don’t report their crypto stolen because they’re embarrassed.
Many consumers get cryptocurrency from exchanges. They open an account, deposit their currency, and convert it to crypto.
The crypto is held in a digital wallet by a custodian. Therefore, it’s assigned to the person’s account, but the exchange stores the private keys that control it.
It’s similar to a bank in many ways. For example, a bank doesn’t hold all of the cash, choosing to disperse it throughout the community.
Likewise, an exchange only stores enough crypto for hot wallets to ensure that customer transactions go quickly. Everything else is held in cold storage wallets.
The issue here is that the government doesn’t guarantee crypto deposits if the exchange goes under or is the victim of theft.
Recently, BitMart got hacked. In December of 2021, the exchange admitted that there was a large security breach where $150 million crypto assets were taken from hot wallets.
The company promised to use its funding to compensate those who were affected, but that hasn’t happened yet.
The same applies to exchanges that fail for commercial reasons. People lose the money in their hot wallets if the company goes bankrupt.
Overall, it’s best to transfer any cryptocurrency to a software wallet and keep it off the exchange. That way, it’s in your control.
With that, many people choose not to buy cryptocurrency at all. They prefer to trade Bitcoin CFDs, which helps them earn real currency that they can remove from the platform and use for anything.
If that’s something you’re interested in, Ekrona app website has you covered.
Types of Scams
Cryptocurrency scams happen when the scammer doesn’t know the target. They include:
- Email phishing – A scammer sends an unsolicited email to ask for personal login information to steal crypto. They may even provide rewards or prizes in exchange for the deposit.
- Investment scams – A scammer creates a website that looks like a legitimate trading platform. It could be a copy of the business or completely bogus. They often post fake adverts online to get people interested if they’ve got the time and energy.
- Romance scams – Here, the scammer creates a fake profile on dating apps. They ask for funds to help during a financial crisis, getting the person’s hard-earned crypto.
It’s crucial to report scams if you come across them, but you aren’t likely to recover your funds. Civil legal action might be possible, but you must identify the criminals. Since crypto is global and decentralized, payments are made anonymously.
The very reason people love crypto could be the way they become victims. Cryptocurrency is decentralized with no government authority.
However, when cyber-crime comes into play, it also makes it virtually impossible to find out who did it and hold them responsible.
It’s best to be overly careful with any digital wallets you possess or use auto-trading software that might be a little safer.