After last week’s article on Bitcoin, I wasn’t going to write another one on the subject until perhaps in a few months, but then a couple of newsworthy episodes occurred in the past week, about which I feel responsible to familiarize you. It’s the kind of good and bad news thing, so to speak. The good is that one bitcoin was worth over $15,000 last week, even though the figure was “merely” $10, 000 the week before. This is obviously great news for Bitcoin investors. The other news item, the negative one, that is; is that a whopping $75 million in Bitcoin was stolen by sophisticated hackers in a Slovenian-based Bitcoin mining marketplace called NiceHash. Obviously, this will be troubling for Bitcoin dealers.
Approximately 4,700 bitcoins were reportedly stolen from the site’s account, according to the CEO of the company. These are worth approximately $75 million as of last week Friday afternoon in Asia. The marketplace suspended operations on Thursday while it investigated the breach, working with law enforcement and urging users to change their passwords. The company (NiceHash) provides a platform for you to mine for other cryptocurrencies and get paid in bitcoin. The company reportedly paid out over $1 billion since it started operations four years ago.
Bitcoin is money, so it’s an attractive target for thieves. Not surprisingly, hacking of vital cryptocurrency sites is not a new thing: The U.S. Federal Trade Commission report for the year 2013 and 2016, received 1,038 and 2,658 cases of Bitcoin hackings, respectively. A Hong Kong-based bitcoin exchange, Bitfinex, was briefly shut down last year after hackers stole nearly 120,000 bitcoins, which was worth more than $65 million at the time.
One issue is that Bitcoin is attracting all sorts of people, many of whom are not aware of the risks and computer security holes in the realm of cryptocurrency. For example, just in the last two months, it is estimated that 1.9 cryptocurrency players signed on to a particular exchange. Qin Chen, writing for CNBC, describes a common approach used to dupe people in her 3 November 2017 online article: “One common crime that’s carried out on cryptocurrency investors is the phone-porting attack. Hackers snoop around social media, looking for cryptocurrency conversations in which investors post their phone and email for easy contact. Then, posing as the victim, they call up the phone provider in an attempt to fool the customer service representative into transferring the phone number to a device they control. Once the hackers take over the phone number, they can go into the victim’s cryptocurrency exchange account by resetting the password, ultimately stealing cryptocurrencies from the account.”
There are many ways to safeguard your bitcoins; but you first need to be aware of how Bitcoin works. The currency is produced by some software program that creates an address for the smallest unit of Bitcoin. The address holds each coin. If you own a bitcoin, you get an exclusive ‘Private Key,’ with which you can make a Bitcoin transaction. There are many apps that help you manage your private keys. Obviously, for security reasons, you should never store your address and Private Key in the same place.
Many people, especially those who trade in cryptocurrency and/or manage exchange houses, have suggested ways to block off the security holes that lead to your money being stolen. With cryptocurrency, there’s probably no perfect solution to the problem, while, your “hard drives and personal computers have become the new bank vaults.”
Here are some of the suggestions given for protecting your currency: a) before you open up an account on an exchange, set up a unique email that you are going to use for that account, b) use a really hard and long password (passphrase), ensuring that only you have access to it, c) on Coinbase, turn off SMS-based two-factor authentication and account recovery for your email account, d) on Coinbase, setup the Coinbase Vault and two-factor authentication for any sends off-site, e) don’t talk about cryptocurrency publicly, especially on social media; don’t tell people “how rich you are,” f) on your cell phone, put every level of security you possibly can, with a hard passcode to it, g) add a “do not port” SIM card to your account, and update this regularly (yearly), h) don’t trust your security to any exchange, no matter what they tell you about how secure they are, i) do not keep all your cryptocurrency investments in one place; that is, diversify among exchanges, j) keep your cryptocurrency off the internet, in a “cold wallet;” load the cold wallet application onto a clean and offline computer, knowing that you can make transactions offline, using a cold wallet app, k) opt for decentralized exchanges, as they don’t hold your funds, so that no one can ever access your funds other than you; meaning that it can’t be stolen unless your private keys are compromised, l) make it a habit to only use your own computer, laptop, or smartphone.
Finally, make sure you back up and encrypt your virtual wallet. Just like your Will, legally designate a beneficiary for your cryptocurrencies, just in case!