The rising cybersecurity concerns of cryptocurrencies

Pile of Bitcoins - Cryptocurrencies
(Image credit: Shutterstock / Wit Olszewksi)

The popularity of cryptocurrency has shown no sign of abating during the pandemic, with the total value of all cryptocurrencies now just short of $2 trillion.

Cryptocurrencies, digital currencies that work on decentralized networks using blockchain technology, have been on the rise for the past decade thanks to a range of factors. One driving force behind their popularity is that they tend not to be issued by governments, meaning that they are theoretically resistant to manipulation from central authorities.

About the author

Jake Moore is a cybersecurity specialist at ESET UK.

Perhaps more important for many people, however, is their potential to provide owners with significant returns. Exchange rates can fluctuate massively, and this volatility can lead to huge profits – and losses – for investors. For example, Bitcoin, the largest cryptocurrency, saw its value climb to $64,000 in April of this year before it dropped to $32,000 just months later.

Whilst Bitcoin accounts for around half of the market, it is by no means the only one available, with CoinMarketCap recognizing well over 1000 different tokens. Unfortunately, its popularity has attracted plenty of attention in the criminal underworld. This has led to an explosion in cryptocurrency scams in the past year, with Action Fraud estimating that such scams have risen by 57 percent. Crypto enthusiasts lost £113 million to scammers last year, an increase of over 140% compared to 2019, with many investors not yet fully aware of the risks involved with putting money into the market.

Dangers of the ‘rug pull’

One of the main reasons cryptocurrency appeals to scammers is because whilst it’s popular, it is still not widely understood. This makes consumers susceptible. This was exemplified by the recent squid token rug pull. The cryptocurrency – named after the wildly popular Netflix drama “Squid Game” – crashed to practically zero value after a dizzying rally pushed it to almost $2,800 the week previous. The rug pull scam happens when a token’s promoter draws in buyers, only to stop the trading activity and run away with investors’ money. In this case, making a quick $2.5 million (£1.8 million).

Like many online scams, this scam aligned itself to a popular trend where the feeling of FOMO is high. Squid Game was the most talked about show on the planet at the time of the token being launched. It’s important that consumers don’t drop their guard. Remain mindful of the perils that come with cryptocurrencies and stick to coins and exchanges that are known and well-reviewed.

Crypto heists on the rise

Even then, though, there is no guarantee that things won’t go badly wrong. Earlier this summer, hackers stole more than £433 million from Poly Network, a service that links some of the world’s biggest cryptocurrency traders and lenders. On this occasion, all but £25 million of the digital coin was transferred back a couple of days later. It is unlikely that this was a case of attrition though, but more down to the fact that laundering cryptocurrencies is very hard due to the dynamics of how the blockchain is designed.

The Poly Networks hack was by no means the first, and generally there is no happy ending. In 2019, one of the world’s largest cryptocurrency exchanges – Binance – was hacked, with criminals making off with bitcoins worth $41 million. A year previously, hackers broke into cryptocurrency exchange Coincheck and stole over ten times more. Back in 2014, an even bigger heist on Tokyo-based bitcoin exchange Mt Gox led to it having to file for bankruptcy after having 850,000 bitcoins stolen.

Following the money

The simple truth is that cybercriminals have been attracted to cryptocurrency for years. Most ransomware attacks demand payment in Bitcoin or another cryptocurrency because they are so hard to trace. This provides the perpetrators with anonymity. Now though, criminals are increasingly attracted to hacking crypto wallets and exchanges. They are, in essence, following the money as cryptocurrencies rise in popularity.

Because of this, I can’t see cryptocurrency scams slowing down any time soon. For anyone attracted to investing, be mindful of the perils and stick to well-reviewed known tokens. Criminals are so good at adapting and evolving to the current zeitgeist, so it is best to steer clear of any tokens that are tied to the latest trends. Cryptocurrencies have their advantages, but one of the main downsides is that once they have been stolen, it’s very difficult to get them back. Users need to weigh up whether the volatility and security implications of cryptocurrencies are worth it for them.

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Jake Moore

Jake Moore is a cyber security specialist at ESET UK. He is also a well respected industry expert who regularly comments on a range of cyber stories in publications such as The Guardian, The BBC, The Independent and Forbes. He is usually asked to give his opinion, advice and analysis on stories featuring a security or technology angle.