New Cryptocurrencies Are Often Vulnerable To Hacks and Thefts
Cryptocurrencies such as bitcoin saw a major boom in 2017. At one point bitcoin was valued at nearly $20,000 a coin. The value of bitcoin, and similar currencies, has fallen a lot recently. However, the market for new cryptocurrencies continues to grow, but so do the threats from hackers.
A report by EY Research said that in initial coin offerings as much as 10 percent of the early investments fell victim to hackers. This is often due to the fact that in ICOs, much of the company’s money is tied up in advertising and promotions leaving the currency vulnerable to hackers. These hacks can include denial of service attacks, phishing schemes, and other scams.
To be fair, traditional banking institutions are not immune to thefts and hacks, but the risks are often much higher with new cryptocurrencies. This is due to the decentralized nature of cryptocurrencies. If money is stolen from a bank, it is often insured by a government so there is little risk to consumers. Unfortunately, cryptocurrencies lack the protections and backing of state institutions.
In addition to the initial theft of funds, which can be as high as $2 billion, cryptocurrency thefts can often ruin a currency before it has a chance to grow. In order to attract investors, cryptocurrencies have to be able to provide a secure method of exchange. An early hack can ruin investor confidence and make it impossible for a new cryptocurrency to grow and expand.
In addition to actual funds stolen, hackers can also gain access to the personal data of investors making ICOs an especially attractive target for savvy hackers hoping to make a quick buck.
Another flaw that the reports noted were in the area of government response. The decentralized nature of cryptocurrencies means that governments have difficult times regulating and policing the markets.
While cryptocurrencies can be a valuable investment for some, the initial risks should not be ignored.
Eric is an avid tech junkie, gamer, and comic fan. When he's not working on his PC, you'll find him at your local comic book shop.