Hackers prefer to attack cryptocurrency exchanges since even the less well-known platforms house Bitcoin, Ethereum, and other valuable tokens worth millions of dollars. According to CoinCulture, this explains why at least 46 cryptocurrency exchanges have been the target of hacking attempts since 2021.
The cryptocurrency business is plagued by the unfortunate reality that cyberattacks on exchanges are quite prevalent, and not even the most popular platforms are safe from attack. Who among us can forget the attack on Mt. Gox, which was once the most successful Bitcoin exchange in the world? Mt. Gox was subjected to many security breaches throughout the course of its existence; however, the most destructive incident took place in 2014 and resulted in the theft of more than 460 million dollars worth of customer assets. The platform was never able to make a full recovery and in the later part of that year it was forced to shut down. Former users of Mt. Gox are still working hard to get reimbursement for the money they lost.
Not only was the attack on Mt. Gox the most notorious, but it also paved the way for a number of other occurrences that were quite similar. Even now, more than eight years after the initial incident, exchanges continue to be the target of attacks. For example, in 2022, one of the most prominent cryptocurrency exchanges, Crypto.com, was the target of a cyberattack that resulted in the theft of over $35 million worth of assets and the compromising of several customer accounts.
Other examples that have occurred this year include Cashio, which was victimized by an attack referred to as a "unlimited mint bug." This assault gave the perpetrators the ability to fool the system and put up worthless collateral in order to borrow the platform's CASH stablecoin. As a result of the attack, the attackers made off with more than $52 million in money, and the CASH token nearly lost all of its value as a result of the collapse of the cryptocurrency.
More recently, the cryptocurrency exchange known as AscendEX suffered a loss of about $80 million worth of consumers' cash as a consequence of a hot wallet that had been compromised.
Some recurring motifs were present in each of the high-profile breaches of bitcoin exchanges that were described above. Although the specific type of the vulnerability that the hackers used to get access to the system was different in each instance, it is arguable that a lack of transparency concerning internal security measures was at least partially to blame for the breach. The fact that all of the aforementioned exchanges violated the law by failing to get the necessary operating licenses and regulations indicates that they may have disregarded the level of care and attention to detail that is necessary to keep an exchange secure.
One more prominent illustration is the recent and well publicized failure of the FTX exchange, which was the second-largest in the world in terms of trading volume. Even if it wasn't hacked, it's obvious that FTX's illiquidity issues were caused by a lack of oversight: the exchange wasn't subject to any real rules, which meant that its operators were free to act anyway they liked. This led to FTX's illiquidity issues. It is not yet known what caused FTX to get into so much difficulties; nevertheless, there are several stories that allege the company mismanaged the cash of its clients.
In any event, there are important takeaways for investors, who should exercise the utmost caution when selecting an exchange to whom they would commit their digital assets. Users are encouraged to exercise common sense and follow a variety of safety measures. For this reason, it makes the most sense to use an exchange that supports two-factor authentication wherever possible. Users should also check to determine if an exchange makes use of cold storage, which is a method of storing the vast majority of a platform's money offline, where they are far more secure. It is also essential to determine whether or not an exchange provides its customers with insurance protection.
To pick an exchange that is highly regulated is nonetheless of the utmost importance, as this demonstrates that the platform has carried out the necessary level of due diligence to guarantee that its digital assets are as secure as is practically feasible.
As an illustration, the rise of Zonda to become the most important cryptocurrency exchange in Central and Eastern Europe did not occur by chance. Because it is one of the most well-regulated exchanges in the world, the market is able to boast that it has never been the victim of a security breach. This is something that the market can be proud of. In addition to its many accomplishments, Zonda has received a FIU license from Estonia, which grants it permission to conduct business everywhere throughout the EU, as well as a FINTRAC license from Canada. Because of the extensive regulation that the company is subject to, Zonda is legally authorized to facilitate the exchange of cryptocurrencies for fiat currencies such as the US Dollar, the British Pound, the Euro, and the Polish Zloty. The company can also facilitate exchanges from one fiat currency to another.
The good news for investors is that there is a wide variety of trustworthy cryptocurrency exchanges from which to pick. In addition to a well-regulated exchange such as Zonda, other cryptocurrency exchanges such as Binance, Coinbase, eToro, Gemini, and Kraken have all built up good reputations for placing a significant priority on the safety of their users' cash.
Hacks on cryptocurrency exchanges will continue to be a significant risk, particularly for unregulated sites that seek to attract new users by luring them with the promise of reduced transaction fees and expanded access to listings of obscure cryptocurrencies. Investors who place an emphasis on safety above all else should steer clear of these temptations and instead choose a cryptocurrency exchange that is fully licensed and has an emphasis on safety as a top priority.