Source: Pixabay

Cryptocurrency has been on the rise for years now, with its decentralized nature being a major appeal. This – combined with rising merchant acceptance and subsequent passive income opportunities – means crypto is here to stay as more folks eagerly set up their digital wallets.

Many businesses have started to accept this form of payment, and people can now use it for shopping, transferring money overseas, participating in yield farming, and more. Unfortunately, while the public embraces cryptocurrency, bad actors have also gotten savvier at fleecing unsuspecting users of their assets. 

Scammers are drawn to crypto because of its facelessness and the inability to cancel or reverse transactions once they’ve been confirmed. Over the years, the amount of funds taken in these scams continues to collectively rank in the billions. 

As a result, it’s imperative to shine a light on exactly how bad actors are scheming to rob people of their crypto. With this information, everyone – from new individual traders to big conglomerates – can have an understanding of the best defenses against cybercriminals with malicious intentions. 

Breaking Down the Reasons and Effects of Illegal Crypto Losses

The level of cryptocurrency fraud that’s taken place over the years is beyond disturbing. With billions worth of currency repeatedly lost over a period of years, online criminals are clearly a few steps ahead of many active crypto users.  

If losses of this magnitude persist, cryptocurrency and the people who rely on it will keep suffering. Warning the public about the ins and outs of these illicit ruses, along with the steps they need to take for online asset protection, is critical to stopping these cyber criminals. 

2023 sees major hacking and scamming of cryptocurrency users

Just last year alone, bad online actors managed to collectively con people out of approximately $2 billion in crypto. In 2022, losses were estimated at $4.2 billion. Both hacking and scams are the driving forces behind these thefts. 

Some of the most common hacking methods take place via security breaches. Cryptocurrency scams, on the other hand, often emerge in the form of faux free giveaways, investment fraud, a long-con under the guise of romance, and even phony apps that trick people into unwittingly revealing their digital wallet information. 

De.Fi, a security app, recently shed light on the extent of these issues and how they keep adversely impacting crypto users. According to the company’s annual report, security vulnerabilities are a major component empowering cybercriminals to unlawfully target digital assets. 

As the public contends with significant crypto losses, certain industry giants – like Celsius, Terraform Labs, and FTX – have come under fire for their unexpected involvement in cryptocurrency fraud. Officials with these companies actually defrauded the very customers who opened accounts with them to trade and purchase crypto. 

Blockchain falls victim to foul play

Since cryptocurrency runs on a blockchain, this public ledger is a prime target for scammers and other offenders wanting an illegal payday. Ethereum, the largest blockchain among engaged users, got fleeced out of a staggering $1.35 billion in 2023.

Combined, BNB Chain, zkSync Era, and Solana also saw hundreds of millions in cryptocurrency stolen by online hackers. Even centralized platforms aren’t safe from bad actors and are losing assets in the multi-million dollar range.

Sometimes, shifty scammers come across traders with limited crypto knowledge and sense an opening. Frequently, folks who are new to crypto and blockchain are less aware of how to safely use online wallets and protect their private keys. Fraudsters generally exploit this via phony websites, cloud mining cons, phishing emails, and fake apps.  

Cybercriminals exploit weak spots in security

While scams are certainly a contributing factor in the losses sustained last year, so are the vulnerabilities in company security setups. More often than not, lax protections of access rights and permissions give bad actors the opportunity they need to pounce.

Without real safeguards in effect, hackers who know what they’re doing are easily swiping people’s assets and/or manipulating the functions of different exchanges. This most commonly manifests in the form of flash loan attacks and exit scams that involve the depletion of token liquidity.

When significant losses like this occur, they can generate market instability and temporary token slumps. This collectively hurts crypto users as volatility frequently leads to value drops and the interim inability to sell tokens.

Preventing Crypto Losses in 2024 and Beyond

As the new year gets started, it is a great time to begin significantly reducing crypto losses. Individual traders and major companies alike can each take steps to protect their assets from falling into the wrong hands. 

By the time someone loses their crypto to hackers, getting it back is nearly impossible. The billions that have been stolen just over the past two years alone are almost certainly gone for good.

To protect their assets, personal traders should maintain a secure blockchain and use an airgap wallet to shield their personal keys. Both of these efforts prevent cyber criminals from getting information that allows them to steal crypto. 

Air-gapped wallets, in particular, operate completely offline and away from any wireless networks, thereby making them excellent for protecting your private keys. Bad actors won’t be able to access your crypto without getting these codes.

Individual traders should also be mindful of promises that sound too good to be true. Offers that convey a sense of urgency and demand immediate transfer are best left alone. 

Furthermore, so-called investment managers who offer their services in exchange for you sending them crypto right away are probably running a con. The same rule likewise applies to folks promising free giveaways, offering easy money, or claiming to be a famous public figure. 

Major companies can work against malicious crypto thefts by investing in high-level cybersecurity protections. Two-factor authentication, know-your-customer (KYC) steps, and ongoing security audits are each worthwhile safeguards to put in place. 

At the heart of preventing future crypto losses is doing away with vulnerabilities that ultimately open the door to nefarious online users.

This article is provided for educational purposes only. Users should exercise caution with investing/dealing with cryptocurrencies and do thorough research prior.