If you are new to bitcoin and the world of cryptocurrencies, here are a few ways crypto theft takes place, along with steps that can be taken to avoid it. Let’s begin with a method of theft that has been in the news as of late — thieves hacking into and posing as ICO administrators.
Crypto theft is, unfortunately, something that we hear about all too often. Just last December, the bitcoin mining service, NiceHash, was hacked and around $64 million was stolen in the process. While this may portray Bitcoin and cryptocurrency, in general, as an insecure setting, the reality is that the market’s security is not the problem — theft almost always occurs when individuals and entities within the space do not understand the intricacies of cryptocurrency and therefore act in ways that expose it.
Crypto theft through ICOs
The most recent example of theft through an ICO is the Seele ICO example that saw hackers impersonate administrators of the company’s Telegram channel, which resulted in them making off with over $1.8 million of the cryptocurrency, Ether. Reports highlight that the scammers used actual names and pictures of Seele employees to communicate with prospective investors and engaged private sales.
While the Seele team cannot be held directly responsible for the scam, their customers bore the brunt of it and suffered the consequences the most. So, how can this be avoided?
When engaging or entertaining the idea of investing in an ICO, make it a point to read all affiliated documentation, learn the team who is orchestrating the ICO, and communicate only with them. It is also important that you check all information regularly in order to make sure you are communicating with the right people. With this type of theft, scammers attempt to capitalize on your complacency — being careful and mindful will eliminate this opportunity entirely.
Exit scams
Staying on the topic of ICOs and entities that deal in cryptocurrency, let’s move from bitcoin theft in organisations where the administrators are among the victims to a situation where the administrators are the perpetrators of theft.
This type of crypto theft occurs when a “company” offers a bitcoin-related service that requires customers to set up and maintain accounts using bitcoin. Once the company has acquired its desired number of accounts or reaches a preset bitcoin value target, it ceases operations and vanishes — in some instances, crying foul play and claiming to have been hacked. However, the reality is that the administrators of the “company” have pulled what is known as an “exit scam”, where they disappear completely — with the bitcoin they stole from their customers. So, how can this be avoided?
Fortunately, for you to fall prey to this type of theft/scam, you would have to be reckless — disregarding basic recommended approaches, such as not dealing with “fly-by-night” ICOs. If you are an amateur crypto investor, spend your cryptocurrency like you would spend your dollar bills — wisely! Carefully evaluate your potential investments, read what they are about, know who their team comprises of — basically, do all your homework before investing. The best way to avoid being conned in this case is to use basic intuition.
Failing to keep your private key, private
This may seem like the most obvious thing to avoid, yet it is surprising how regularly reports of this show up. This type of threat occurs when bitcoin holders maintain and manage their own wallet instead of using options like Coinbase. In this situation, scammers and thieves would gain access to email accounts, or any other digital location where a wallet key is stored, and steal it, which they would then use to access a wallet. How can this be avoided?
Pretty straightforward. Keep your key in a safe and offline location — locked away. You could also opt to write it down on a piece of paper — whatever you choose to do, keeping it offline is the safest way to make sure it does not get stolen.
If you do use a service like Coinbase, consider using two-factor authentication on both your email account and Bitcoin storage service to keep your accounts secure.
The IAME role
We have highlighted three ways that crypto theft can occur, however, crypto assets are not the only thing that is stolen in these circumstances. Key pieces of information about an individual’s identity are exposed, which leaves at more than just the risk of financial loss. Therefore, ensuring the safety and security of this information is critical — especially if you run a legitimate entity. Failing to do so may result in entire companies being unofficially blacklisted and investors dissuaded — just ask Seele.
The IAME decentralised fragmented identification system is undoubtedly the answer to such entities, given that it transforms the identification process by fragmenting meaningful data into individual components of identification data. These data fragments are then shared with a group of third-party validators, who then verify each component assigned to them. The result of this is that the data sharer would be the only person with knowledge and access to all the data in a meaningful way.
If you would like to know more, please visit our Website and read our White Paper. Any feedback, comments, or questions can be asked directly to our team by visiting our Telegram Channel. For updates on IAME, you can follow us on Linkedin, Facebook or Twitter. Stay tuned to our blog series, for more of the latest news in the crypto and blockchain realms.
