Major cryptocurrency deanonymization event is imminent

Cryptocurrency community is all but ignoring an existential risk that may radically change the whole cryptocoin ecosystem. Read on to learn more.

There were at least 4 hacks of major cryptocurrency exchanges in the last 6 months. Every time exchanges were hacked, tokens were stolen. There are suggestions, not entirely without merit, that some “hacks” were done by the owners of the exchanges.

• Coincheck lost nearly $500 million in January 2018
• Youbit lost about 17 percent of total assets in December 2017
• Bithumb lost more than $1 Million in June 2017
• BitGrail lost $170 million in February 2018

A reasonable assumption is that personal user data at exchanges is protected at most as strongly as private keys, but probably much weaker.

It is only logical to conclude that in most cases where hackers got access to private cryptocurrency keys, they also got access to private user data.

It is also quite probable that there were a significant number hacks that weren’t made public where hackers were not able to penetrate defenses of subsystems managing private keys but got access to private data.

See where I’m going?

At some point, a database of one the exchanges containing credentials, personally identifiable information, deposit addresses, balances, withdrawal addresses and individual transactions will be leaked and becomes publicly available.

This should not be surprising to anyone. The security track record of most tech companies is abysmal. The following megacorps had their user databases leaked: Adobe, Yahoo, Linkedin, Dropbox, Tumblr, Badoo, Rambler and many others. Quite obviously, ahuge number of leaks weren’t detected or reported.

Learn more about huge number of private user data leaks at haveibeenpwned.com

Let me put in the simplest terms: it is very probable that your privacy WILL be compromised.

In fact I think that nation-state sponsored hacking teams were already able to get access (probably real time) to databases of at least several major exchanges.

The leak of personally identifiable data will be compounded by chain analysis and correlation techniques[pdf].

The fact that this threat vector is not being heavily discussed either by core teams of most cryptocurrencies nor general cryptocurrency communities is quite perplexing.

Some consequences

• Fungibility of major cryptocoins is significantly reduced
• Cryptocurrencies stop being considered as anonymous/pseudonymous
• Cryptocurrencies (Monero, Zcash) with strong privacy protections usage prices soar
• DEXes usage and popularity surges
• Centralized exchanges usage drops
• Cryptocurrency whales become much vulnerable
• Major press coverage of persons of interest that is comparable with Panama leaks

Invest time and resources into improving your operations security. Be prepared.