No one likes to lose their hard-earned money from their cryptocurrency investments, however, some unforeseen events do manage to wipe out investors' wealth from their trade wallets. One of the popular practices would be hackers luring investors into appealing offers on social media platforms making them look like clickbait in a certain cryptocurrency. Just one click, and before you know it, your money has been drained from your hot wallet. While sometimes the investor is left helpless when the money they transfer to their account via ATM goes to the hackers instead. The latest example and casualty of hackers would be General Bytes-backed Bitcoin ATM and Solana wallets, where investors lost millions of dollars. While the awareness of cyber threats has increased among investors in the crypto market, especially this year, however, the uncertainty still pertains and is getting more advanced with time.
On August 18, in their security incident update, General Bytes intimated about a hack where attackers exploited a zero-day vulnerability in the servers of Bitcoin ATMs and managed to dupe investors' money.
Earlier this month, Solana token witnessed selling pressure on exchanges after users reported about their funds getting drained without their knowledge from their “hot” wallets including Phantom, Slope, and TrustWallet. Thousands of Solana investors suffered a heavy blow. As per reports, Solana is estimated to have recorded a loss of between $5 million to $8 million.
Solana and General Bytes were another fish in the pond of hackers. As per an analysis, nearly $2 billion worth of cryptocurrencies has been stolen in hacks so far this year.
In its mid-year crypto crime update, Chainalysis last week revealed that overall, cryptocurrency transaction volumes this year for both illicit and legitimate entities are tracking behind 2021 through July. Overall, criminal activity appears to be more resilient in the face of price declines --- illicit volumes are down just 15% year over year, compared to 36% for legitimate volumes.
According to Chainalysis mid-year report, total scam revenue for 2022 currently sits at $1.6 billion, 65% lower than where it was through the end of July in 2021. The platform cited that the decline appears to be linked to declining prices across different currencies.
Also, the cumulative number of individual transfers to scams year-to-date in 2022, is the lowest it’s been in the past four years.
In Chainalysis views, fewer people than ever are falling for cryptocurrency scams. One reason for this could be that with asset prices falling, cryptocurrency scams — which typically present themselves as passive crypto investing opportunities with enormous promised returns — are less enticing to potential victims.
"We also hypothesize that new, inexperienced users who are more likely to fall for scams are less prevalent in the market now that prices are declining, as opposed to when prices are rising and they’re drawn in by hype and the promise of quick returns," the report added.
Furthermore, darknet market revenue is also down significantly in 2022 and is currently 43% lower than where it was through July last year.
On the other hand, the data showed that through July 2022, $1.9 billion worth of cryptocurrency has been stolen in hacks of services, compared to just under $1.2 billion at the same time in 2021.
In its report, Chainalysis said, "this trend doesn’t appear set to reverse any time soon, with a $190 million hack of cross-chain bridge Nomad and a $5 million hack of several Solana wallets already occurring in the first week of August (neither is represented on the graph above as we’ve chosen July 31 as our cutoff point)."
The reason behind hacks can be attributed to the stunning rise in stolen funds from DeFi protocols - a trend that began in 2021.
"Still, with huge increases in stolen funds, we can’t afford to rest on our laurels. The public and private sectors must continue to work together and hone their ability to fight cryptocurrency-based crime," the report said.
While hacks are one of those unexpected events that seem to still swing as one of the major drawbacks for the cryptocurrency market. As an investor, who has invested in cryptocurrencies, it is important to be alert and cautious while trading and safeguard their investments in cryptos.
How to protect your hot wallets from getting drained by hackers?
Poorvi Sachar, Head, Operations, Tezos India said, "In order to protect your trade wallets from getting drained by hackers, one should defect from clicking spam links on the internet. It is highly recommended to not share your keys (public/private) with anyone."
The user must never trust any message initiated from outside while engaging in exchange. Sachar suggests using cold wallets instead of hot wallets to protect your keys.
Cold wallets are less risky and the information remains with the customers. Cold wallets are offline which means they do not require internet services. They are hardware wallets in the form of a physical medium which reduces the chance of getting data leaks and theft among others - until and unless the user shares his or her details with someone else.
Meanwhile, hot wallets are connected to the internet and are part of the cryptocurrency exchanges --- hence they are more vulnerable to cyber hacks.
"Hacking on social media is prevalent, and its appealing deals can get the user in a fix. Disconnect wallets on suspicious dApps and always revoke permissions after transacting. The wallet message should look familiar to the ones that have been used before. Utmost care has to be taken during any transaction," Sachar added.
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First Published:
22 Aug 2022, 05:35 PM IST
