The rise of cryptocurrencies has been meteoric. Terms like "Bitcoin," "Ethereum," and "Dogecoin" have entered the mainstream lexicon and become part of popular culture. However, as their popularity has surged, so too have the number of hacks targeting cryptocurrency exchanges.
What Is Cryptocurrency?
Built on blockchain technology, cryptocurrency is a decentralized (and largely unregulated) digital currency. Unlike official, government-issued fiat currency, virtually anyone can create, issue, and trade cryptocurrency. This has led to a proliferation of different virtual "currencies." The most famous cryptocurrencies include Bitcoin, Ethereum, Tether, Cardano, and Dogecoin.
In theory, cryptocurrency can be used like regular currency. However, this usage is still developing, and it is rare for major retailers to accept crypto payments.
Furthermore, due to their decentralized nature, cryptocurrencies are vulnerable to several issues. For instance, the emergence of crypto trading has led to speculators trading cryptocurrencies on exchanges, much like investors trade stocks, hoping their value will increase. Perhaps more significantly, malicious actors can exploit this decentralization to hack crypto exchanges and transactions.
Types of Cryptocurrency Hacks
In 2022, cryptocurrency hacks resulted in the theft of a [combined $3.8 billion](https://edition.cnn.com/2023/02/01/tech/crypto-hacks-2022/index.html) from various exchanges. This was an increase from the $3.3 billion stolen in 2021. This occurred despite a major downturn in the value of many cryptocurrencies that same year, driven largely by a crisis of confidence and the fallout from these attacks.
There are multiple types of cryptocurrency hacks, and understanding the differences can help owners and traders keep their assets safe. The three most common crypto crimes you should know are:
Bridge Attacks
As the name implies, a bridge attack is a type of crypto hack where cybercriminals target the transfer of cryptocurrencies between different blockchains. Because each cryptocurrency exists on its own blockchain, moving them from one chain to another (e.g., from Ethereum to Dogecoin) involves a transfer protocol called a cross-chain bridge. These are critical for maintaining the crypto ecosystem, but they can easily become targets for hackers—for instance, through bugs inserted into the bridge code or the exploitation of cryptographic keys.
Wallet Hacking
Cryptocurrency owners use wallets to store, manage, and transfer their holdings. There are different types of wallets (cold and hot), and hot wallets are always connected to the internet, making them vulnerable to exchange hacks. Cybercriminals can exploit network vulnerabilities to break into crypto wallets and steal any currency stored within.
Exchange Hacking
Some cryptocurrency owners choose to manage their holdings using digital currency exchanges. An exchange is essentially an online platform where users can trade or store currency. Because exchanges typically hold vast amounts of cryptocurrency, they are prime targets for hackers. Attackers use various types of assaults—such as phishing and social engineering—to steal the digital currencies stored in an exchange's hot wallets.
How Cryptocurrency Hacks Work
Hackers use numerous methods to execute cryptocurrency hacks. Understanding these mechanics can make it easier for owners to secure their funds. The top three things to understand are:
- Phishing: One of the most common types of digital attacks. Here, malicious actors send emails to trick cryptocurrency owners into divulging information or downloading malware that gives the hacker access to their crypto wallet, allowing them to steal the currency.
- Malicious Code: Because cryptocurrencies and the software used to manage them are all built on code, they can contain vulnerabilities that hackers can exploit. Hackers manipulate code at weak points in the crypto infrastructure to carry out exchange hacks, bridge attacks, and more.
- Key Theft: Crypto wallets and exchanges require owners to use keys to access their digital currencies. If cybercriminals can steal these keys, they can easily carry out a cryptocurrency hack.
As cryptocurrency has rapidly gained popularity, the number of exchange hacks has increased alongside it. The largest attacks—such as the FTX hack—have resulted in the theft of millions of dollars, the closure of the targeted exchange, and sometimes even legal troubles for the exchange's owners. While some trading platforms and wallets (like StormGain) have not yet faced major hacking issues, it is likely only a matter of time. The most infamous exchange hacks you should know about are:
1. Ronin Network
In March 2022, the largest cryptocurrency hack in history saw a group of cybercriminals (believed to be a North Korean hacking group) break into the game-focused Ronin Network exchange and steal approximately $615 million in Ethereum and USDC stablecoin cryptocurrency. The hackers succeeded in their cyberattack by using stolen private keys from the owners to withdraw the digital currency. This made it a premier example of a hack carried out via key theft.
2. Poly Network
Another major case of a crypto exchange hack occurred in August 2021. Here, attackers exploited a vulnerability in the Poly Network software to make off with $611 million worth of cryptocurrency. However, in this instance, the hacker became known for carrying out the attack simply to prove that it was possible. The hacker ultimately returned all of the stolen funds.
3. FTX
The FTX hack, carried out in November 2022, is perhaps the most notorious instance. At the time, the exchange was one of the most famous in the cryptocurrency industry, but on the day it declared bankruptcy, [the FTX exchange was hacked, with more than $600 million stolen from its wallets](https://www.coindesk.com/business/2022/11/12/ftx-crypto-wallets-see-mysterious-late-night-outflows-totalling-more-than-380m/). This was the first of two hacks on the FTX exchange. In January 2023, a hack against the FTX exchange resulted in the theft of $15 million worth of digital currency.
4. Binance
In perhaps the most famous case of a cryptocurrency hack, cybercriminals targeted the Binance exchange in October 2022, ultimately making off with $570 million. To successfully carry out the attack, the hackers exploited the BSC Token Hub cross-chain bridge, creating additional Binance coins before making off with all of the available digital currency.
5. Coincheck
The attack on Coincheck in Tokyo in January 2018 was one of the early crypto exchange hacks. The attackers exploited a vulnerability in the exchange's hot wallet to steal a total of $534 million in NEM currency. Coincheck, which had set a high standard for companies affected by crypto exchange hacks, used its own funds to reimburse customers who had their funds stolen during the attack.
6. Mt. Gox
This exchange suffered two massive attacks, which is part of the reason it no longer exists. In the first attack, carried out in 2011 when Mt. Gox handled nearly 70% of all cryptocurrency transactions, the attackers stole digital currency worth approximately $400,000. However, during a hack in 2014, when the exchange handled only about 7% of the available Bitcoin, hackers made off with $437 million from the platform's hot wallet. Mt. Gox began bankruptcy proceedings in the wake of the attack.
7. BitMart
When hackers attacked the BitMart exchange in December 2021, $196 million was stolen. In this cryptocurrency hack, the attackers used stolen administrator keys to access the exchange's digital currency before siphoning it away via Ethereum and Binance.
8. Nomad Bridge
A prime example of a bridge attack, [the Nomad Bridge cryptocurrency exchange hack saw users lose $190 million.](https://edition.cnn.com/2022/08/03/tech/crypto-bridge-hack-nomad/index.html) Here, the hackers exploited a function of the platform that allowed users to move digital currency between different blockchains. Only $36 million of the lost funds were ultimately recovered.
How to Prevent Cryptocurrency Exchange Hacks
For anyone who owns or trades cryptocurrency, taking steps to secure your Bitcoin is critical. While there are numerous steps you can take, some of the most recommended include:
- Get a cold wallet – A cold wallet stores your Bitcoin offline (on a hardware device), making it a much harder target for hackers.
- Use a VPN – A Virtual Private Network encrypts all your online traffic, adding a layer of security against attackers.
- Maintain defenses – Protect your devices by using antivirus software and firewalls, and keep all your software up to date.
- Apply basic password security – Remember basic steps like regularly updating passwords, creating strong passwords, and using a password manager to keep your passwords (and your crypto wallet) secure.
- Try multi-factor authentication – Requiring multiple layers of verification to access your crypto wallet makes it easier for users to protect their Bitcoin from potential cryptocurrency hacks.
- Watch for phishing scams – Be wary of suspicious emails, calls, or texts that may be attempting to steal your information, install malware, or use the information they obtain to hack your cryptocurrency exchange. Never click suspicious links or enter your information on a site that may be unsecured or a scam.
- Protect your seed words – Seed words are used to access the information needed to work with the cryptocurrency stored in your exchange or wallet. Losing your seed words means you may permanently lose access to your Bitcoin. However, if a hacker can access your seed words, they may be able to steal the Bitcoin associated with that account.
Staying Vigilant Against Cryptocurrency Hacks
The FTX hack and its accompanying legal drama and media circus (along with numerous other famous cryptocurrency hacks) have demonstrated that crypto owners and traders need to be aware of the potential for attacks. While protecting these assets requires the adoption of basic internet security measures—such as using antivirus software, a VPN, and secure passwords—one of the most critical safety steps is using a cold wallet, which is much more difficult for hackers to target.
Frequently Asked Questions
What was the biggest crypto hack?
The Ronin Network attack in March 2022 is considered the largest single crypto hack to date, with approximately $615 million in cryptocurrency stolen. The attackers, believed to be associated with North Korea, used stolen private keys to access and drain funds from the network's bridges.
Can you get your money back from a crypto hack?
Recovering funds after a crypto hack is extremely difficult due to the irreversible and pseudonymous nature of blockchain transactions. While some centralized exchanges may offer reimbursements from their insurance funds (as Coincheck did), this is not guaranteed. In decentralized exploits, recovery is rare unless the attackers voluntarily return the funds.
How do I protect my crypto from hackers?
Use a hardware (cold) wallet for long-term storage, enable all available security features like multi-factor authentication (MFA) on your exchange accounts, and never share your private keys or seed phrases. Keep your software updated and be highly vigilant against phishing attempts.
Are crypto exchanges safe?
The safety of a crypto exchange depends on its security practices. Look for exchanges that use cold storage for the majority of user funds, have transparent proof-of-reserves, and offer robust security features like MFA and whitelisting. However, no exchange is 100% immune to risk, which is why self-custody of large sums is often recommended.
What is a bridge attack in crypto?
A bridge attack targets protocols that transfer assets between different blockchains. These bridges often hold large amounts of locked assets, making them attractive targets. Hackers exploit vulnerabilities in the bridge's smart contract code to mint fraudulent assets or steal the locked funds.
What should I do immediately if my exchange is hacked?
If your exchange account is compromised, immediately change your password and enable MFA if it wasn't already. Contact the exchange's support team to report the issue and freeze your account if possible. Monitor your linked email for any unauthorized changes and check your transaction history for any unauthorized withdrawals. 👉 Explore more strategies for securing your digital assets after a security incident.