Crypto wallets are an essential mechanism for sending and receiving digital coins. They come in different forms and those that connect to the internet and are accessed through smartphones, tablets, laptops, and other electronic devices are known as hot wallets.
They’re easy to set up and can be used to move funds quickly, which is especially important to traders and other frequent users. Crypto exchanges that store your funds in their digital infrastructure can also be considered as hot wallet providers.
But constant connectivity is also a major risk factor. As your hot wallet goes online, it becomes susceptible to hacks and many devastating breaches have highlighted just how vulnerable this crypto storage option is.
1. BINANCE — Even The Biggest Get Hacked
Amount: Over 7,000 bitcoin, worth roughly $41 million at the time of the attack ($84M today)
Period: May 7, 2019
Even the largest do not remain unharmed. In May 2019, an unknown hacker group breached a hot wallet from one of the world’s largest cryptocurrency exchanges, Binance. Malicious actors stole API keys, two-factor codes, and over 7,000 bitcoin, worth around $41 million at the time. The company immediately suspended all withdrawals and deposits. The attack affected about 2% of Binance’s bitcoin holdings and the platform announced it will cover user losses with its own set up emergency insurance pool called SAFU (“Safe Asset Fund for Users”). CEO Changpeng Zhao said that his team will introduce significant changes to security protocols and withdrawal validation processes to prevent similar attacks from happening.
2. BITPOINT — A Fifth of the Company’s Value Wiped Out
Amount: 1,225 bitcoin, 1,985 bitcoin cash, 11,169 ether, and 5,108 litecoin, worth around $28 — $32 million at the time of the attack
Period: July 12, 2019
Bitpoint, a crypto exchange run by the Japanese company Remixpoint, was hacked in July 2019. Vast amounts of bitcoin, litecoin, ripple, and ether were found missing from its hot wallet. The loss amounted to $32 million with more than half of it being customer funds. Cryptocurrencies stored in the company’s cold wallets were not affected. Remixpoint promised that it would compensate customers for these losses, and its shares plunged 20% after the hack was revealed.
3. BITHUMB — 3rd Time’s The Charm
Amount: 3 million EOS, worth $13.4 million at the time of the hack, and another 20 million Ripple coins (XRP), worth another $6 million
Period: March 29, 2019
Bithumb is no stranger to being hacked. The South Korean crypto exchange was breached for the third time on March 29, 2019, as hackers stole 3 million EOS, worth $13.4 million at the time of the hack, and another 20 million Ripple coins (XRP), worth another $6 million. The funds were taken from the platform’s hot wallets. Fortunately, all the stolen coins were owned by the company and members’ assets were protected in a cold wallet.
Subscribe To The NGRAVE Blog
Get the latest insights on crypto, security, blockchain, and more.
4. ELECTRUM — A Months-Long Siege
Amount: 771 bitcoins, worth around $4 million at the time of the attack
Period: Late December 2018 — March 2019
Electrum, a popular bitcoin wallet, was under siege from late 2018 until March next year. Hackers launched a series of phishing attacks that tricked victims into downloading a malicious version of the wallet. Then, they stole wallet keys and seed data. Over 770 stolen bitcoins, worth around $4 million at the time of the attack, were broken down into smaller amounts and moved to several public addresses controlled by the scammers. The developers behind Electrum turned to an unusual tactic to protect users. They exploited the same flaw in their software the hackers did and redirected users to download the patched version of the wallet. After noticing this, attackers launched distributed denial of service (DDoS) attacks before developers eventually took control of the situation.
5. IOTA — Shutting Down The Entire Network
Amount: An undisclosed amount of IOTA coins, worth around $1.6 million at the time of the hack
Period: February 12, 2020
IOTA Foundation, the nonprofit organization behind the IOTA cryptocurrency, was also a victim of a cyber-attack on February 12, 2020. Hackers used an exploit in IOTA’s Trinity hot wallet app to steal coins worth around $1.6 million from at least 10 high-value accounts. The foundation had to shut down its entire crypto network to stop the attack and enable developers to find and patch the vulnerability criminals exploited. Law enforcement officials are involved in tracking down the attackers, while the IOTA price fell on the market once the news of the hack was announced.
Protect your funds in a cold wallet
Hot wallets are convenient tools for real-time transactions but are far from being a secure storage option. Ideally, users should use them for trading small funds, while most of their coins are safely stored in cold wallets.
To that end, NGRAVE ZERO is of great help, as it’s one of the — if not THE — coldest wallets on the market. Our Indiegogo crowdfunding campaign was the most successful in this category as 1.225 backers from 72 countries purchased 1.317 ZEROs for a total of $431,772.