Biggest Crypto Hacks of 2021—And What We Can Learn from Them

Disclaimer: The Industry Talk section features insights by crypto industry players and is not a part of the editorial content of Cryptonews.com.

Photo by Jason Pofahl on Unsplash

It’s abundantly clear that cryptocurrency, DeFi, and the blockchain technology making it possible—are all here to stay.  While prices of the most famous coins continue to spike and drop, the actual innovation developed by the industry in 2021 is something that society will be discussing for decades.  The number of platforms has exploded, and though there have and will always be a few junk coins and scam platforms, there are many more with solid business plans and utility to offer their communities.  For any technophile or crypto enthusiast, this truly is an amazing time to be alive.

Which is why it hurts so much more when another crypto platform makes the news because of theft, hacking, or manipulation.  Hundreds of millions have been lost this past year, and in most cases the wallet holders will not get their money back.  The best aspects of cryptocurrency are also the worst; with no “undo” button, thefts and hacks take on a much darker and serious tone for those heavily invested.

Instead of living in fear, though, perhaps we can examine some of these incidents, analyze the reasons and methods for the attacks, and look to see what lessons we can learn from this.  Finally, let’s look at some of the emerging techniques to prevent these kinds of attacks from being possible, and which platforms are making that protection a reality.

Key Crypto Attacks in 2021

Livecoin

Cryptocurrency exchange Livecoin, headquartered in Russia, suffered a hack in late 2020.  While the attackers didn’t steal cryptocurrency outright, they were able to successfully sabotage the exchange by manipulating the exchange rate values.  This made it possible for the bad actors to quickly score major profits and exit, leaving the exchange with the mess made from the hackers, both directly as well as the indirect effects to those holding the affected currencies.  With incalculable damage done to the financial position and reputation of the exchange, they shut down the platform and left the market (and the mess).

Tether

Instead of a direct hack against their platform, Tether was attacked in the form of extortion.  Hackers claimed to have stolen a large number of Tether documents that were sensitive in nature and that, in the words of the hackers, would “harm the Bitcoin ecosystem.”  In exchange for not releasing these documents Wikileaks-style, Tether would have to send the hackers 500 BTC, worth around $24 Million USD at the time.  To their credit (or insanity), the platform stood firm against the threat and refused to pay.  In a move of pure genius, Tether proactively announced that some of the alleged documents had been released by the hackers, but that they were forged in order to cause harm to the platform.  Whether this is true or not is unclear, but it cast enough doubt on the legitimacy of the documents that it likely reduced the actual fallout from the attack.

Coinbase

While the attacks above targeted the platform itself, an attack against the Coinbase community went after individual users in an attempt to sneak into over 6,000 accounts and transfer money into the hackers’ wallets.  While not all accounts were successfully attacked, a certain number were hit and money was stolen.

Poly Network

Poly Network… did not have a good year in 2021.  An unknown hacker exploited an Ethereum smart contract weakness, and managed to steal an eye-watering USD 600 Million in cryptocurrencies from wallet addresses under the care of Poly Network.  This was over half a Billion dollars gone in an instant, which casts a very ugly truth about the risks that still endanger the DeFi industry from mass adoption, and show that much tighter security, controls, and transparency are required for the industry to be taken seriously in the long term.  In this case, Poly reached out to other platforms to ask that they blacklist the addresses that stole the money.  They publicly warned the hacker that this much money stolen would gain the attention of law enforcement worldwide, and that they should return it.  Surprisingly, they returned USD 342 Million outright, and another USD 268 was returned in an account that required both parties to enter a password—essentially placing the money in limbo for the time being.

Platforms with Innovative Protection for 2022

The hacks that occurred in 2021 are incredibly dangerous, not just because money was stolen from many people who likely won’t get it back, but because the industry itself is currently at a tipping point.  It has gained enough momentum, enough support, and enough investment to be a massive force; enough perhaps to gain full, globally legal status as a financial ecosystem equal to that of traditional banking and stock markets.  That legitimacy, which has been fought for by most of the platform teams who have worked hard to bring their visions to life, is in real danger every time another hacker steals cryptocurrency from a weakness in a platform.  The money stolen isn’t cash in a bank vault, insured by the government.  There are individual victims whose holdings aren’t protected if stolen; people who believe in crypto so much that their life savings are invested.  And if enough individuals are victimized by these attacks, the entire industry may be discredited.  

This heavy weight drives toward one clear conclusion:  the security for crypto platforms must improve.  While ideally blockchain is incredibly secure, 2021 has shown that it isn’t secure enough.  The bright side is that several platforms are taking innovative approaches to increasing security exponentially, making the odds of an attack significantly lower, and making the security of those invested in the platforms much safer than vulnerable chains.  Here are a few platforms making a difference with innovative approaches to security.

ParallelChain

What’s more difficult to break into than a vault?  How about three vaults?  ParallelChain recognized that for mainstream corporations to adopt blockchain, there had to be a separation between internal operations and the customer-facing operations in terms of data, security, and interoperability.  To address this, they’ve created a ParallelChain Private platform, where companies can utilize the benefits of blockchain within their organization; ParallelChain Mainnet, which operates as a platform for decentralized application and uses a unique POS consensus names ParallelBFT; and an Inter-ParallelChain Communication, which is a separate network designed to connect the private and public platforms for a given company, ensuring security without sacrificing efficiency.

Partisia Blockchain

Partisia has made the headlines with its growing number of applications that make use of its MPC, or Multi-Party Computation, architecture.  While pioneered in the 1980’s, MPC has been waiting for the right technology to come along for it to unleash its full potential.  The structure and purpose of blockchain is perfect for MPC, and Partisia has developed a platform that can use the best of each technology.  Simply put, MPC allows different parties to work together to solve a problem, using private information that each party owns, but without disclosing that private information to the other parties.  From validation techniques to cutting down on counterfeit  prescription medicine, the ability to ensure secure and untampered information is very promising.

HyperDex

The HyperDex platform is interesting in that, though its platform security is very strong and has been fully audited, the key focus of their innovation is protecting against attacks that happen in the trading market itself.  No amount of security can protect those trading on an exchange from targeted price manipulations and other tricks that bad actors have used to falsely move the market, take advantage, and disappear with ill-gotten winnings.  HyperDex has realized this and has created a number of easy-to-use strategies, called “cubes”, for their users to select and apply to their accounts.  Each cube is a specific risk/return algorithmic strategy that works on behalf of the user, and is able to instantly recognize and protect against market attacks should they occur, reacting in milliseconds and taking action in ways a human would never be able to do.

Looking Forward

As 2022 moves on, we will undoubtedly see more crypto attacks make the news.  This is an unfortunate consequence of any maturing industry, where loopholes are exposed, discovered, and exploited.  But thankfully, there are a growing number of platforms with teams of true innovators who are working even harder than the hackers to protect investors’ money.  More importantly, they are working to bring the industry into the mainstream, giving it the respect it deserves.

This news is republished from another source. You can check the original article here

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