Arm yourself with Knowledge and Further Safeguard your Bitcoins
Bitcoin and cryptocurrencies at this point in time are not without their own sets of limitations and downsides. There have been numerous instances of individual wallets or entire exchanges being the victim of theft. Most large scale thefts occur at exchanges or online wallet services that store private keys of it’s users.
Crypto thieves hack their target online wallet service by finding a bug in its website or spreading malware to computers holding the private keys. One method in which bitcoins are stolen is transferring them from the victim’s btc address using a stolen private key to sign the transaction. If this key is stolen the thief can use it to transfer the coins from the compromised address to another address they select. Once this occurs the network has no way to identify the thief, block further transaction of those stolen coins, or have a way to return them to the owner.
Instances of high-profile bitcoin thefts have been reported from time to time.
- In late February 2014 Mt. Gox, one of the largest virtual currency exchanges, filed for bankruptcy in Tokyo reports that 744,000 bitcoins had been stolen.
- In November 2013 tens of thousands of bitcoins or purportedly stolen the estimates of roughly $100 million in bitcoins were stolen from underground online marketplace Sheep Marketplace, which subsequently closed. Users tracked the coins as they were processed and converted into cash, ultimately they were unable to recover any of the funds and no culprits were identified. Victims of the theft have attempted to identify the thief by sending “tagged” bitcoins to his accounts, using the public nature of bitcoin transactions to follow these moneys through the “blockchain” record of transfers. This theft is so large and obvious it sticks out like a sore thumb. If this person were to launder the money it would potentially reveal the culprit, his pursuers believe. Its hard to clean and sell more than 4 or 5 btc at a time. He has 1% of the word’s bitcoins.
- Silk Road 2, stated that during a February 2014 hack bitcoins valued at $2.7 million were taken from escrow accounts.
- March 2014 Flexcoin, a bitcoin storage specialist based in Alberta, Canada shut down after saying it discovered a theft of about $650,000 worth of bitcoins.
Bitcoin theft is a very real and present danger for holders. Even large traditional financial and retail institutions are the targets of cybercrime. The best way to safeguard your bitcoins is to be mindful of these issues that can arise. Bottom Line: Spread your risk, diversify your holdings, and identify solid methods to stash your cash.