Cryptocurrency is a digital payment system that doesn’t rely on banks to verify transactions. It’s a peer-to-peer system that can enable anyone anywhere to send and receive payments. Instead of being physical money carried around and exchanged in the real world, cryptocurrency payments exist purely as digital entries to an online database describing specific transactions. When you transfer cryptocurrency funds, the transactions are recorded in a public ledger. Cryptocurrency is stored in digital wallets.
Cryptocurrency received its name because it uses encryption to verify transactions. This means advanced coding is involved in storing and transmitting cryptocurrency data between wallets and to public ledgers. The aim of encryption is to provide security and safety.
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In June 2011, Linode, a web hosting company, was hacked, and the virtual services that housed the hot wallets were the victims. This led to the theft of at least 46,000 BTC, though the exact amount is yet unknown. Among the victims were Bitcoinia, which lost approximately 43,000 BTC, Bitcoin.cx, which lost 3,000 BTC, and Gavin Andresen (a Bitcoin developer), who lost 5,000 BTC.
Bitfinex, a Hong Kong-based Bitcoin exchange, suffered a significant heist in August 2016 when hackers stole 119,756 BTC, worth around $72 million at the time. Bitfinex had partnered with BitGo to serve as a third-party escrow for customer withdrawals, but it appears that Bitfinex decided against using cold wallets to qualify for a legal exemption from the Commodities and Exchange Act.
Mt. Gox was once the largest Bitcoin exchange in the world, with over 70% of Bitcoin trading happening on its platform. However, it suffered a significant setback in 2014 when it filed for bankruptcy after losing 850,000 BTC, worth over $450 million at the time.
According to Mt. Gox, the loss was due to a flaw brought on by the transaction malleability bug, which is a fundamental flaw in Bitcoin. The private keys of Mt. Gox were stolen in September 2011, but the company failed to identify the incident until mid-2013. The stolen set of keys was utilized to steal fresh deposits, and by mid-2013, the exchange had lost approximately 630,000 BTC.
KuCoin, a cryptocurrency exchange based in Singapore, suffered a hack in September 2020, leading to the theft of significant amounts of Ethereum, Bitcoin, Litecoin, Ripple, Stellar Lumens, Tron, and Tether. The Lazarus Group, a North Korean cyber outfit, was allegedly responsible for the $275 million cash loss. However, the exchange was eventually able to recoup almost $240 million in payments.
In August 2021, a hacker, known as Mr. White Hat, stole digital tokens worth almost $600 million from Poly Network, a DeFi platform. The hacker took advantage of a loophole in the network. However, in an unexpected twist, Mr. White Hat returned everything that had been taken a week later.
Some other crypto heists include a hot wallet hack at Bitmart in December 2021 that led to a loss of around $200 million, the loss of $620 million at Ronin Network after a hacker “used hijacked private keys to generate false withdrawals” and the fall of FTX In November 2022 after FTX Hackers stole $90 million from its US platform, $2 million from Alameda Research, and $323 million from its Bahamas-based parent company FTX.com.