The Cybersecurity Threats Inherent in Bitcoin & Blockchain Currency
Almost every type of investment comes with a certain degree of risk, whether the transaction takes place in-person or online. The same goes for Bitcoin and other cryptocurrencies monitored through blockchain. Although physical theft is usually less of an issue with these currencies, they are constantly at risk for cyber-attacks.
In this article, we discuss the inherent cybersecurity threats when dealing with Bitcoin and blockchain currency. We also take a look at the steps that one could take to minimize these risks.
Common cybersecurity threats
There are three cybersecurity threats commonly associated with the use of Bitcoin and blockchain currency:
- Security flaws in the code
- Weak authentication
- Transaction storage issues
The primary advantage of Bitcoin is that it is a decentralized currency. It uses a peer-to-peer network wherein nodes in the Bitcoin system work on a ‘trustless’ mechanism to authenticate transaction logs. The main benefit of this approach is that anyone can buy and sell bitcoins without compromising their security or even divulging their identity. Even so, dealing in Bitcoin exposes users to potential cybersecurity risks such as:
1. Your Bitcoin wallet can be hacked
In general, bitcoins are much safer on the user’s computer or smartphone than on a website. There is always a risk that hackers will break into them and access the users’ transactions with web-based wallets.
In the case of mobile apps, someone could break into the app and steal the user’s keys. Of course, physical access to a wallet won’t necessarily enable the hacker to seize its contents remotely. Even so, mobile devices could be compromised by keylogger malware intended to obtain their wallet credentials.
2. Data leakage
Another potential risk involved when dealing with Bitcoin is data leakage. The same centralized services that store user funds also store private keys, which are often exposed by weak authentication methods. This is why it’s important to review the security measures of every Bitcoin service thoroughly, paying particular attention to how their cyber liability insurance and private keys for deposit addresses are handled.
3. Malware
One of the main drawbacks of the Bitcoin system is its susceptibility to attacks from malware such as keyloggers or Trojans. These intrusions allow hackers to learn users’ credentials and steal their funds. Although there aren’t any widespread reports of Bitcoin wallets being compromised by malware, it is still a potential threat for many users.
4. Weak authentication
Bitcoin has many security measures that protect the system from attacks, but authentication is widely recognized as an area of weakness. Anyone can obtain bitcoins pretty easily, even when providing weak passwords.
This means that anyone could download a wallet client, create an account, and send bitcoins without providing any verification. This makes it possible for anyone to claim that they are the legitimate owner of the bitcoins simply by using fake IDs. Anyone could also create a fake email to set up an account on different websites and send money to that account.
5. Phishing
This is a method of obtaining Bitcoin users’ private information by sending them emails requesting personal data or their account credentials. The easiest way to avoid phishing attacks is to not click on links that seem too good to be true.
Keep in mind that phishing often involves sending emails to users to request additional information. It is generally a good idea not to save email addresses in documents shared online to prevent unauthorized access by unscrupulous third parties.
6. Routing attack
A routing attack is another common method used for stealing bitcoins. This involves tricking users into sending money to a different address controlled by the hacker.
There are many ways by which attackers can do this with cryptocurrency transactions. The most common method is phishing, in which attackers posing as friends or trusted contacts instruct victims to change their passwords. The email may also contain a request for financial information such as credit card or bank account numbers or new bank account or balance numbers.
Final thoughts
The cybersecurity threats mentioned above are possible in large part because of how bitcoin transactions are conducted. Many of these threats can be avoided by taking appropriate security measures, such as keeping bitcoin wallets updated, using anti-virus software, and protecting assets with more robust authentication measures.
About Moody Insurance Worldwide
Moody Insurance Worldwide, a division of Moody & Associates that was founded in 1914, is a leading provider of risk management programs and insurance coverage to individuals and businesses across the East Coast. We write all sizes of businesses, with technical expertise in many key industry areas, and provide personal insurance programs for estates and high net worth individuals. Our licensed, experienced commercial account managers can work with you to determine the coverage that you need at a competitive rate. Contact us today at (855) 868-0170 to learn more about what we can do for you.