A large volume of digital assets passes through the blockchain space daily, making it a target for crypto hacks. Recently, the number of crypto hacks has been on the rise from attackers trying to gain access into the personal wallet of users or using the loopholes of DeFi platforms to their advantage.
Poly Network hack attracted the crypto community’s attention in 2021 because of the volume of tokens stolen and subsequently returned by the hackers. Hotbit hack was another situation that rocked the space, as the hackers cloned and deleted the database of users after they were unable to gain access to the exchange’s hot wallet.
When a custodial exchange or wallet is hacked, it could affect the crypto holdings of users. Sometimes, the exchange may even refund the stolen cryptocurrencies. Non-custodial exchanges and wallets do not hold their users’ private keys, meaning a hack of the platform won’t affect their clients. The only time a Trust Wallet or Exodus Wallet hack will lead to a transfer of funds is if the wallet’s private keys were stolen from the user directly.
A cryptocurrency hack can occur in different ways:
This involves the scammer tricking the user into sending funds to the wrong address. They usually pretend to be a popular legitimate platform.
- Losing private keys
Anyone that has access to a wallet’s private keys can transfer the funds in the address to another location. Usually, scammers try to convince people to input their private keys or send malware to gain access.
- Exit scams
This is a situation where scammers create a fake exchange, allow users to trade on it for a while to gain trust, and then disappear with the funds. Unfortunately, the same thing happens in custodial DeFi protocols.
- Hacking of exchanges
Recently, exchanges have been a target for hackers. Usually, they target the exchange’s hot wallet and transfer the funds in it elsewhere. Crypto hacks are a recurrent ordeal for exchanges.