Approximately $64 million in Bitcoin was stolen from digital currency exchange, NiceHash, this week, after the platform was hacked. The intrusion is one of the largest successful Bitcoin thefts to occur since the cryptocurrency was first launched in 2009. Security and finance experts alike are calling the event a sign of further strife to come; a lack of industry oversight and poor security protections may raise the risk that other platforms will fall victim to similar attacks. Such negative attention could potentially lower the value of cryptocurrencies across the board, but hasn’t so far. It might also cause more platforms to increase their oversight and security methods.
Bitcoin Hack Facts
- NiceHash, located in Slovenia, is just one of thousands of potential Bitcoin trading markets online. Experts say that many of these platforms fail to do enough to protect the investor, and may also be subject to similar intrusions or thefts.
- In total, three dozen Bitcoin trading platforms have fallen victim to hacking attacks since 2011 totalling nearly $4 billion in loss for investors. Most of the platforms immediately went under as a lack of government oversight and technological ability made it virtually impossible to recoup funds.
- Difficulty in tracking and reversing transactions is just one of the problems the Department of Homeland Security has with cryptocurrencies as a whole. The way the cryptocurrency functions makes it virtually impossible to tax or manage without significant changes to the U.S. currency system.
- High risks to investors have the U.S. Government considering a move to license and provide oversight for cryptocurrency trading platforms. Acting Comptroller of the Currency of the United States, Keith Noreika, announced an interest in making such a move earlier in the fall.
- Although cryptocurrencies are inherently risky (like most investments that could realize a decent return), there are ways to mitigate at least some of the risks. Whenever possible, use offline hardware wallets – these offer a higher level of security because they can be removed from the network. If you must use online wallets, do your research. Be aware that any online wallet, regardless of its claims, technically has a risk for an intrusion attempt.
- If you do choose to use online wallets, think of your wallet as being similar to Paypal. Use it to store or transfer Bitcoin, but transfer large amounts out to a safer solution (like an offline hardware wallet or USB wallet). Never leave high-value balances in an online or PC-based wallet unless you are actively trading.
- Always use a strong password and two or three-factor authentication for your wallets. The extra step may seem like a pain, but it will protect you from serious harm later on down the road. Use strong, 16+ digit passcodes with numbers, letters, and symbols whenever possible, and keep your passcode stored offline in a place where it cannot be accessed (e.g., a bank deposit box or safe).
- Never store your passcodes on your PC or anywhere near your wallet.
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What, if anything, stops you from investing in cryptocurrency (or investing more than you already do, if you are investing now)?