History of Bitcoin Hacks and Frauds

$650 millions worth Bitcoins hacked since its inception - Bitcoin Mining being the most trended service around the world, carries a lot of scars. The probable profit and the surging hacks have made the decision for investing into bitcoin, a big question.
History of Bitcoin Hacks and Frauds
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There is no doubt that Bitcoins have taken a huge surge from the time it came into existence. Its value has grown to 10 times of the initial unit in this year itself. Some feel that the opportunity is nothing less than a fortune and few are skeptical about the prospect because of the history of scams related to this economy.

It is rightly said that with enormous benefit, the chances of scams related to it increases too. If it paves way to the profit for investors, it opens doors for the scammers as well. This mantra is not new and is associated to all financial investments. The more the profit, the larger the risk and Bitcoin are no different.

This year has showed less damages than the previous ones. But, still the gates are not entirely secured and can be hacked. This little chance can create a big damage for many, while others can still recover from the attack, given that the precautions have been taken prior to any big decision.

Bitcoins network are secure and highly protected. The bitcoin software is still unreachable to the imposters. However, the bitcoin related services come first as the vulnerable site for the hackers.

I agree, that the list that I am going to present focuses upon the older attacks and the intensity as well as frequency of these attacks were prominent in 2011 and 2012 more as compared to what we face today. But, it still exists and that alarms us to take every step towards bitcoin investment with caution.

A bitcoin user Lost $500,000 in June 2011 to hackers

2011 started bitcoin interest among users as hobby more than investment. It was comparatively easy for users to mine bitcoins from a personal computer to generate thousands of units.

A bitcoin user claimed that he had amassed 25,000 bitcoins. In 2010, the worth was close to nothing for bitcoins. However, the start of June 2011, the price surged to $20 which made the total worth of his bitcoins to be $500,000.

However, this excitement couldn’t last for long. He soon affirmed that his bitcoins were stolen from his hard drive and were locked inside the account of the hacker with no access of him.

He said, “I just woke up to see a very large chunk of my Bitcoin balance gone.”

Can you imagine if they were still with him? Yes, he would have owned $250 million by now through his bitcoins.

The wallet services were attacked in August 2011

With increase in the trend of Bitcoin Mining, wallet services appeared in 2011. These services offered an application to store bitcoins in an online wallet. However, not considering the risk, these services were made with less security giving way to the hackers into the customer’s accounts.

For example, one wallet service that was very popular in August 2011, claimed that the website of the company was hacked, and the application disappeared. All the money was lost. It would be hard to suggest if the fraud was from a hacker or the company itself. Isn’t that suspicious on their part as well.

The lack of regulation made it difficult for the users to determine the reliability of a given wallet service.

If you wish to use a wallet service, blockchain.info is a better deal. This is a client-side web wallet. This provide encryption of client’s data that is saved on the server, making it less risky. But, we cannot consider it entirely secured as well.

Web Host leads were hacked in March 2012

Linode, a shared online host was attacked to steal more than 46,000 bitcoins which totalled for $200,000 in March 2012. The bitcoins were stolen from several users on Linode with Bitcoinica alone losing more than 43,000 bitcoins.

Bitcoinia was attacked for the second time in May 2012. This costed the company with a loss of another 18,000 units of bitcoins. This raised questions on the security of this bitcoin exchange service and was taken off for the further audit.

In August 2012, the company was sued by various users and the company had to close its operations.A service like bitcoin mining, should never be hosted on a shared server. The customer’s data can be compromised if a third party gets the access to the encryption keys. Hence, there should be minimal to no intervention while providing bitcoin services to users.

Ponzi Scheme was pinned down in August 2012

The high return promises made by the classic Ponzi scheme attracted a lot of customers. In this scheme, the investment from new customers were used to pay the old ones. Like always, the scheme shut down in August 2012 leaving many investors at a huge loss.

The government did not mercy and charged Tendon Shavers of raising more than 700,000 bitcoins through this scheme. In 2014, Tendon was asked to pay $40 million to the victims.

Exchanges got hacked in September 2014

Bitfloor, a bitcoin exchange was attacked by the hackers in September 2012. 24,000 bitcoins were stolen from various users which worth close to $250,000 in 2012. This made the company insolvent.

The company started its operation after few weeks but couldn’t meet the demand and supply and was closed in April 2013, leaving customers out of money.

Then the world’s largest exchange was attacked in February 2014

Mt. Gox, the top bitcoin exchange in 2014, ran by Mark Karpeles, the CEO of the company, was attacked in February 2014. Its headquarter was in Japan and was successfully helping people in buying and selling of Bitcoins from 2010 till 2014. In 2014, after the attack was made, Mt. Gox confirmed that 850,000 bitcoins were stolen likely by the scammers.

That time, the worth of the stolen bitcoins was $450 million which would have been $8.5 billion by now.

Alexander Vinnik, the owner of BTC-e, a bitcoin exchange was arrested in July in relation to the theft and was charged for using and laundering the stolen bitcoins through his network.

Although, the company filed for bankruptcy, the prices stayed to surge, giving a chance to the owners for paying the debts in full through the remaining amount left.

Bitstamp exchange was hacked in January 2015

Bitstamp, a bitcoin exchange was attacked in January 2015 and lost 19,000 bitcoins to the hackers. The worth by then for the stolen bitcoins was $5 million. However, this exchange was lucky to survive the attack and remains one of the leading exchanges as of now.

Addition of more exchange to the list of hacks in August 2016

Bitfinex, another bitcoin exchange claimed that the bitcoins were stolen from their network, worth $77 million. This happened in August 2016 and the company forced its customers to accept a reduced value of their bitcoin by 36 percent.

Bitfinex is still running, however, the lack of information about the address and owners of the company, makes it suspicious.

NiceHash was attacked in December 2017

Talking about the latest hacks, here is the one that happened few days back which brings us to the fact that the security is still a challenge. NiceHash, a Slovenian bitcoin mining marketplace claimed that there was a theft of bitcoins worth $78 million.

Andrej P Skraba, the marketing head said, “a highly professional attack with sophisticated social engineering” that resulted in approximately 4,700 bitcoins being stolen, worth about $78m at current prices.”

As the intensity is still to be investigated, NiceHash has suggested its users to change their password. However, the social media accounts of the company is being bombarded by the frustrated customers questions.

The Verdict

Considering the above thefts, the total loss is more than $650 million. Bitcoin has been speeding up in terms of value and interest. Hence, has become the right target for many hackers and fraudsters. This calls for a regulation. Until then, you need to be cautious before investing into bitcoins.

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