As the popularity of cryptocurrencies continues to soar, so does the number of hackers targeting exchanges. In 2017, crypto exchanges reported losing approximately $266 million as a result of security breaches and heists. However, the first half of 2018 alone has reported that triple this amount has been stolen from crypto exchanges already.
At the beginning of July 2018, blockchain security firm CipherTrace reported that $731 million has been stolen from crypto exchanges this year alone. Nate Whitehall of CryptoSlate says:
“With each passing crypto hack, there’s more at stake. These heists aren’t just becoming more common. They’re becoming significantly more valuable.”
In this article, we’ll take a look at some of the most prolific crypto heists in history.
The Coincheck heist
In January 2018, hackers found a loophole in the Coincheck exchange that allowed them to steal over 500 million NEM. This was worth around $530 million at the time. While only the NEM was breached and other funds remained secure, NEM Foundation has stressed that the hack was nothing to do with the security of the XEM cryptocurrency.
They have insisted that the blame is entirely on Coincheck, saying that it was a result of its ‘relaxed security measures’. Because such a significant percentage of XEM was compromised, many people immediately assumed that NEM would carry out a hard fork in order to recover the funds. However, this did not occur. Coincheck now has the reputation of being the victim of the biggest crypto exchange hack in history.
The Mt. Gox hack
Up until the recent Coincheck hack, the Mt. Gox Hack was the biggest crypto heist in history. It still remains the biggest Bitcoin heist to have ever occurred.
Mt. Gox was a crypto exchange based in Tokyo, Japan. Between 2013 and 2014, it handled over 70% of all worldwide Bitcoin transactions. Unfortunately, by February 2014, the exchange had declared bankruptcy.
The hacker stole approximately 850,000 Bitcoins - worth around $450 million at the time. What’s more, this was approximately 6% of all Bitcoin in existence at the time. Therefore, at the time of the theft, this was a significant percentage of the total crypto market cap. In that sense, this was even bigger than the Coincheck hack. 200,000 of the stolen Bitcoins were eventually recovered. However, approximately 650,000 remain lost forever.
Founder of Ethereum Vitalik Buterin during TechCrunch Disrupt London 2015. Photo by John Phillips/Getty Images for TechCrunch.
The DAO attack that led to the creation of Ethereum Classic (ETC)
A ‘DAO’ is a Decentralized Autonomous Organization that aims to eliminate the requirement for third-parties in governing and to ultimately create a structure that has decentralized control. It does this by turning the rules and decision-making apparatus of an organization into code.
‘The DAO’ was the name of a particular DAO. It was launched on the 30th April 2016 and had a 28-day funding window. It was extremely popular - so much so that by the end of its funding period, it was the largest crowdfunded organization in history.
Throughout the crowdsale, several people expressed concerns about The DAO’s security and suggested that it could be vulnerable to attack. Despite this, it went on to raise over $150 million from 11,000 members - far more than its creators had ever imagined.
On June 12th, 2016, Stephen Tual, one of the creators of The DAO, announced that a "recursive call" bug had been found in the code. However, at the end of his post, stressed that "this is NOT an issue that is putting any DAO funds at risk today." Unfortunately, Tual turned out to be very wrong. By the time the team had identified the bug and begun to fix it, a hacker was already exploiting it and draining The DAO of the ether it had collected from its token sales.
By the 18th of June, less than a week after the announcement had been made, the hacker had already managed to drain over 3.6 million ether (worth approximately $70 million) into a “child DAO”. This alone led the price of Ether to fall drastically from $20 to $13.
As a result of this catastrophe, an Ethereum hard-fork was proposed, with 89% of Ether holders voting in favor of it. This led to the creation of Ethereum Classic (ETC) - a new cryptocurrency which shares the data on the Ethereum blockchain up until block 1920000.
The Bitfinex exchange heist
Bitfinex is currently ranked as the second largest crypto exchange in terms of daily trading volumes. However, in August 2016, the exchange suffered a hacking heist that resulted in the loss of over 120,000 Bitcoins, worth around $66 million. Within hours of the attack, the value of Bitcoin had dropped from over $600 to $540. Moreover, the users never received compensation for their lost Bitcoins. Instead, the exchange paid users in BFX tokens for their losses and promised to buy these tokens back at a later date.
The platform experienced another cyber attack in June 2018. However, this attack only affected trading operations. Thankfully, no user accounts were compromised.
The BitFloor exchange heist
Despite being relatively unknown, the BitFloor heist remains one of the biggest Bitcoin heists in history. It resulted in the loss of over 24,000 Bitcoins. At the time it was considered relatively small. However, in today’s terms, the hack would be worth a surplus of $141 million.
Back in 2012, BitFloor was one of the largest competitors of Mt. Gox. However, it had to shut down abruptly when hackers gained access to the private keys of users. This was made possible because the hackers were able to gain access to the users’ private keys, which were stored in an extremely insecure manner in an unencrypted state, online, for backups.
Luckily, the exchange was able to refund users for their losses. However, it was ultimately forced to shut down.
U.S. Navy ships
The U.S. Navy controls patents for some futuristic and outlandish technologies, some of which, dubbed "the UFO patents," came to light recently. Of particular note are inventions by the somewhat mysterious Dr. Salvatore Cezar Pais, whose tech claims to be able to "engineer reality." His slate of highly-ambitious, borderline sci-fi designs meant for use by the U.S. government range from gravitational wave generators and compact fusion reactors to next-gen hybrid aerospace-underwater crafts with revolutionary propulsion systems, and beyond.
Of course, the existence of patents does not mean these technologies have actually been created, but there is evidence that some demonstrations of operability have been successfully carried out. As investigated and reported by The War Zone, a possible reason why some of the patents may have been taken on by the Navy is that the Chinese military may also be developing similar advanced gadgets.
Among Dr. Pais's patents are designs, approved in 2018, for an aerospace-underwater craft of incredible speed and maneuverability. This cone-shaped vehicle can potentially fly just as well anywhere it may be, whether air, water or space, without leaving any heat signatures. It can achieve this by creating a quantum vacuum around itself with a very dense polarized energy field. This vacuum would allow it to repel any molecule the craft comes in contact with, no matter the medium. Manipulating "quantum field fluctuations in the local vacuum energy state," would help reduce the craft's inertia. The polarized vacuum would dramatically decrease any elemental resistance and lead to "extreme speeds," claims the paper.
Not only that, if the vacuum-creating technology can be engineered, we'd also be able to "engineer the fabric of our reality at the most fundamental level," states the patent. This would lead to major advancements in aerospace propulsion and generating power. Not to mention other reality-changing outcomes that come to mind.
Among Pais's other patents are inventions that stem from similar thinking, outlining pieces of technology necessary to make his creations come to fruition. His paper presented in 2019, titled "Room Temperature Superconducting System for Use on a Hybrid Aerospace Undersea Craft," proposes a system that can achieve superconductivity at room temperatures. This would become "a highly disruptive technology, capable of a total paradigm change in Science and Technology," conveys Pais.
High frequency gravitational wave generator.
Credit: Dr. Salvatore Pais
Another invention devised by Pais is an electromagnetic field generator that could generate "an impenetrable defensive shield to sea and land as well as space-based military and civilian assets." This shield could protect from threats like anti-ship ballistic missiles, cruise missiles that evade radar, coronal mass ejections, military satellites, and even asteroids.
Dr. Pais's ideas center around the phenomenon he dubbed "The Pais Effect". He referred to it in his writings as the "controlled motion of electrically charged matter (from solid to plasma) via accelerated spin and/or accelerated vibration under rapid (yet smooth) acceleration-deceleration-acceleration transients." In less jargon-heavy terms, Pais claims to have figured out how to spin electromagnetic fields in order to contain a fusion reaction – an accomplishment that would lead to a tremendous change in power consumption and an abundance of energy.
According to his bio in a recently published paper on a new Plasma Compression Fusion Device, which could transform energy production, Dr. Pais is a mechanical and aerospace engineer working at the Naval Air Warfare Center Aircraft Division (NAWCAD), which is headquartered in Patuxent River, Maryland. Holding a Ph.D. from Case Western Reserve University in Cleveland, Ohio, Pais was a NASA Research Fellow and worked with Northrop Grumman Aerospace Systems. His current Department of Defense work involves his "advanced knowledge of theory, analysis, and modern experimental and computational methods in aerodynamics, along with an understanding of air-vehicle and missile design, especially in the domain of hypersonic power plant and vehicle design." He also has expert knowledge of electrooptics, emerging quantum technologies (laser power generation in particular), high-energy electromagnetic field generation, and the "breakthrough field of room temperature superconductivity, as related to advanced field propulsion."
Suffice it to say, with such a list of research credentials that would make Nikola Tesla proud, Dr. Pais seems well-positioned to carry out groundbreaking work.
A craft using an inertial mass reduction device.
Credit: Salvatore Pais
The patents won't necessarily lead to these technologies ever seeing the light of day. The research has its share of detractors and nonbelievers among other scientists, who think the amount of energy required for the fields described by Pais and his ideas on electromagnetic propulsions are well beyond the scope of current tech and are nearly impossible. Yet investigators at The War Zone found comments from Navy officials that indicate the inventions are being looked at seriously enough, and some tests are taking place.
If you'd like to read through Pais's patents yourself, check them out here.
Laser Augmented Turbojet Propulsion System
Credit: Dr. Salvatore Pais
