How To Protect Your Blockchain Assets From Crypto Thieves?

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Recently, a potential theft of over $326 million of Ethereum tokens from a blockchain bridge was reported. Well, this isn't surprising as crypto crimes are at an all-time high, especially since the pandemic crippled the world.

 

Crypto crime

Crypto crime is a swiftly-growing area, and the immense growth of the crypto economy and decentralized finance (or DeFi), backed by record-shattering prices of cryptocurrencies in 2021 gave cybercriminals the opportunity they were seeking. This brings us to the question - how are these crypto thefts done, and what can we do to stay one step ahead of these crypto thieves.

Types Of Crypto Theft

Types Of Crypto Theft

These crimes can be categorized into two ways of stealing cryptocurrency - stealing directly from the owner, or tricking people to hand them over using a scheme.

Last year, crypto thieves were able to steal $3.2 billion worth of cryptocurrency, as per Chainalysis. This is five times the crimes committed in 2020. But schemes became the biggest weapon for these criminals, as they managed to lure $7.8 billion worth of cryptocurrency from victims.

Stealing From Exchanges
 

Stealing From Exchanges

Most people get their cryptocurrency from an exchange. This requires to them open an account and deposit currency to convert it into their preferred cryptocurrency.

The cryptocurrency is usually kept in a 'custodial wallet', which means it's assigned to a person's account, but the private keys are controlled by the exchange. But unlike a bank, the authorities do not have a financial claims scheme to guarantee cryptocurrency deposits if the exchange shuts.

In December, BitMart announced that it had "identified a large-scale security breach" that witnessed criminals steal around $150 million in crypto assets from hot wallets. The exchange halted all operations and promised consumers to cover their losses. However, the exchange is yet to compensate the victims.

To prevent stealing from exchanges, consumers can transfer their cryptocurrency from the exchange to a software wallet or a hardware wallet which can be disconnected from the web. This will enable owners to take control of their crypto assets. However, they should note that once they lost their private keys, they lose all the cryptocurrency stored in the wallet.

Scams Consumers Should Identify

Scams Consumers Should Identify

As per ACCC's Little Book of Scams, the common scams in the crypto world are those where the scammer and victim do not know each other.

Email phishing is one such scam where unsolicited emails are sent asking for personal login details, which criminals might use to steal cryptocurrency. Some emails promise rewards, prizes in exchange for a deposit.

Investment scams are where scammers create a website that seems like a legitimate trading platform. It could be a copy of a real business that posts fake ads on social media. Once crypto deposits are made, victims could trade on the fake platform, but won't be able to withdraw their earnings.

Romance scams involve creating a fake profile that matches with victims on a dating platform. These matched profiles might ask for funds from victims for a personal emergency such as requiring surgery. Or they might influence the target to invest in cryptocurrency, luring them into an investment scam.

Challenges Faced By Victims

Challenges Faced By Victims

Victims face a lot of legal challenges in the case of crypto crimes. While reporting a scam might be good for providing data to regulators and law enforcement, it's unlikely to result in fund recovery.

Victims can take legal action as well, but identifying the accused is hard. Since cryptocurrency is decentralized, payments can often be made to parties outside of the victim's country.

The best way to avoid being scammed is the make sure of the person you're dealing with, and make transactions through a known exchange. If you come across an offer that's too good to be true, it should be a red flag.

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