Cybersecurity and cryptocurrency should go hand-in-hand to ensure your crypto and systems are protected. Cryptocurrencies are built on blockchain technology, which has revolutionized the way we do business and transact with one another. The very nature of blockchain technology—decentralization, cryptography, and consensus—is designed to achieve a level of security based on trust and the absence of potentially corrupt authorities.
However, the same qualities that are intended to protect the integrity of transactions and ownership also leave it open to security threats. The decentralization feature, one of the hallmark characteristics of blockchain and cryptocurrency, can prove problematic when it comes to security. With no formal or legal structures and no protocol in place to provide traditional financial protection for transactions, there are opportunities for criminals to benefit.
Why do Cyber Criminals Target Cryptocurrency?
Cryptocurrency is tempting to cybercriminals for several reasons. There is very little formal legislation, it can provide almost complete anonymity, and criminals can flip and convert gains from illegal activities far more easily as compared to an old-fashioned money-laundering scheme. It has also been used as a method of ransom payment for all the reasons just mentioned. Over the years, there has been a notable and steady increase in crypto-based cybercrime as criminals continue to find cracks in the blockchain security systems.
Blockchain Cybersecurity Threats
Whether you're an individual, part of a business, or an owner, you must understand that blockchain-based cybersecurity threats are out there.
Cryptojacking
Cryptojacking is when criminals gain access to another computer and mine crypto without the users’ knowledge or permission. Hackers use various methods to achieve this, including malicious links, viruses, and phishing.
Phishing
Phishing aims to gain access to credentials illegally. When it comes to blockchain phishing, criminals use traditional methods to detect keystrokes and mirror screen interfaces to obtain login details and Cryptojack unsuspecting victims.
Trading Platform Hackers
Cryptocurrency is bought, sold, and traded via trading platforms, which require logins and codes like most apps and platforms. Once these details are breached, the hackers use the victim's credentials for their financial gain. In 2021, there were more than 20 significant hacks where the perpetrators stole $10 million or more in digital currencies. By comparison, the FBI reports that robberies of traditional banks averaged less than $5,000 per incident.
Third-Party Applications
A third-party app is not sanctioned or designed by the manufacturer of the device or the administrator of the site it's offered on. They can be extremely dangerous when it comes to crypto-jacking because it's relatively easy to gain access to the crypto apps and platforms if a user downloads it and provides permission. Understanding the security protocols of third-party apps is increasingly important for businesses. In 2017, during the NotPetya cyberattack, powerplants, banks, metros, and shipping companies were affected by malware that was delivered through a common accounting app in Ukraine.
Malware
That strange-looking attachment that you just clicked might be malware. Malware related to cryptojacking intends to remain hidden undetected on your computer so it can use your computing power to mine crypto without your knowledge. For crypto miners, it is a significant issue if malware enters their systems. Individual traders who fall victim to malware also put their hard-earned crypto portfolios at risk.
Investment Scams
Investment scams are fake websites that try their best to seem legitimate. The crypto-related investment scams are prevalent, promising users unbelievable investment opportunities. The keyword here is unbelievable. Once the victim invests part of their crypto with the fake enterprise, they may suddenly find themselves locked out of the account without the ability to contact the scammers.
Giveaway Scams
Giveaway scams are often used in conjunction with identity fraud, where scammers pretend to be celebrities or well-known crypto personalities. They tend to offer assistance to smaller investors by providing them with once-in-a-lifetime opportunities. Once the investment is made, they disappear along with the crypto.
Initial Coin Offering (ICO) Fraud
All cryptocurrencies have to start somewhere, and when they do, there's an ICO. If everything is legitimate, it can be a great place to start investing in an exciting new currency. However, when the currency doesn't exist and the ICO is fake, it becomes the perfect platform for criminals to lure people in with an “exclusive” or “limited opportunity.”
There are many other variations of all of these scams. In essence, cybercrime hasn't changed its modus operandi. The methods have simply been tweaked, and the focus has shifted to crypto instead of credit cards and bank details. Luckily, technology continues to evolve to protect users against looming threats, like Google Cloud’s Virtual Machine Threat Detection (VMTD), which is intended to increase protections against crypto-related malware and hacking. In the meantime, you can protect yourself against these threats by using enhanced security features and trusted providers, combined with instincts, logic, and performing due diligence when checking offers.
The Built-in Protection of Blockchains
Blockchains have various mechanisms to ensure that processes and transactions are fair and sanctioned.
Immutability & Consensus
Immutability and consensus are the two primary ways blockchains attempt to keep themselves safe. Consensus validates transactions via nodes within a network which must all agree on the state of the network. It is achieved via a series of consensus algorithms.
Immutability is defined by the ability of blockchains to avoid changes to transactions that the algorithms have already confirmed. So immutability can keep crypto transactions and other blockchain functions like NFTs safe.
Cryptography
Cryptographic hashing functions are vital in maintaining the integrity of blockchain data. Hashing is when an algorithm receives an input of data varying in size and returns an output or hash that contains a predictable and fixed size. These hashes are the unique identifiers for data blocks, which form the basis for secure blockchain transacting.
Cryptoeconomics
Lastly, a newer concept known as cryptoeconomics adds another layer of blockchain protection. It is based on game theory which models decision-making using rational actors in scenarios with predefined rules and rewards. Cryptoeconomics is the study of blockchain economics and protocols and how their design and function might influence the end user's behavior. The theory, in short, is that there should be more incentive to do good than to behave maliciously.
Even though blockchain has some impressive built-in security features, many of which are evolving and developing daily, there is still a need for some of the more traditional cyber security methods such as:
When it comes to cybersecurity and cryptocurrency, staying safe is all about vigilance, being savvy, staying up-to-date on the latest security technologies available to you, and getting professionals involved when it makes sense. Taking what works from older security protocols and infusing new strategies will help make you as secure as possible.
