Hackers turn to old tricks to beat secure bitcoin protocols

Hackers quickly turn their eyes to places where the money is. Finding the buzz around bitcoins across the world, they are trying to exploit the euphoria. The users have either lost huge amounts of money or on the verge of losing it. Technically, experts say, the bitcoin protocol is difficult to barge in. This, they feel, would mar the image of crypto currencies, whose USP being a safe currency.

Bugs in the wallets, traditional techniques that can make your devices slaves to hackers and vulnerabilities in the bitcoin exchange market places are some of the methods that hackers are using to target the bitcoin users.

Moreover, over 40 exchanges have disappeared into the thin air so far, some maybe on genuine reasons and others due to fraud or cyber compromises.

"The underlying technology architecture and encryption standards of the Bitcoin protocol is difficult to exploit. Attackers are using easier routes to exploit crypto currency, especially through users, wallets and exchange applications,” Rajat Mohanty, the Co-founder and Chief Executive Officer of Paladion Networks, has said.

The attackers are using social engineering techniques to get access to the e-wallets and encryption key from the bitcoin users. They are also using the old trick of gaining access to a PC or a mobile and taking them under their control to prevent access to their bitcoin wallet.

“Their devices are held up until they pay the ransom. Attackers can also using sniffing technique in a local network to uncover a particular user’s bitcoin transaction,” he said.

“There are several hundred bitcoin exchanges and they are as open to hack as any website, because they are just yet another web application. Mt Gox, Bitfinex, Bithumb or more recent Nicehash are some examples. These exchanges and market places are not regulated. Some exchanges could be highly unreliable.

Crypto currencies such as bitcoin are irreversible in nature, and has no insurance protection against loss, so any cyber compromise can lead to permanent loss. It therefore needs a much higher level of security protection than other technologies.

‘Fear of Missing Out'

“The bitcoin valuation surge is a speculation by media and the fear-of-missing-out mentality of the investing community. By now 80 per cent of the bitcoin in the world is mined already and is out for consumption. Challenge in the crypto world is how to kill the speculation for price stability,” Deric Karunesudas, Business Development Manager (Cyber Security) of Dimension Data, India, said.

“The weakness lies in the wallet which stores the bitcoins and has our private keys,” he felt.

Block chain protection

Technically, cryptocurrencies have a secure method to share, store, and record data transparently through blockchain technology, to Zac Cheah, Chief Executive Officer of of Pundi X, pointed out.

Headquartered in Indonesia, Pundi X is an ecosystem that supports blockchain developers and token holders to sell cryptocurrency and services at any physical store in the world.

“The vulnerabilities involved with crypto currencies can be attributed to two major causes - first, human errors, such as you lose or forget your private key to retrieve your digital properties, or you share your private key with someone else. Second, hacking of wallets and exchanges,” he said.

Minimising risks

To minimise the risks from third party mechanical errors, you can consider using a digital wallet and keep your private key at your own risk.

“Or you can take your digital wallet offline, which are referred to as cold wallets. In this way, you can free from worrying vulnerabilities from the third party exchange platforms,” he said.

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