Hacking

November 21, 2023 - Around 2 mins mins to read

Understanding Hacking

Hacking is the act of compromising or manipulating computational devices or systems by identifying and exploiting weaknesses. The purpose of hacking can vary, from terrorism funding and money laundering to sanctions evasion. For example, the Lazarus Group, a North Korean hacking unit, has stolen billions of dollars in cryptocurrency.

There are different types of hacking, some with noble intentions and others with criminal motives:

“White hat hacking” aims to enhance security by identifying and fixing vulnerabilities in systems. On the other hand, “black hat hacking” involves attacking systems for illicit purposes. Lastly, “grey hat hacking” also attacks systems using unconventional or unethical methods, but without malicious intent.

An example of a recent “white hat” hack is the hack of Poly Network, a cross-chain protocol, which resulted in the theft of $612 million. Shortly after the incident, the white-hat hacker returned the funds and gained recognition as “an eternal legend.”

Conversely, a recent “black hat” heist is the hack of Japanese exchange Liquid, where $90 million was stolen from their warm wallets, which act as a bridge between their internet-connected hot wallets and offline cold wallets.

Hacking plays a significant role in the study, design, and exploitation of cryptocurrencies. This is because blockchain, the fundamental concept behind cryptocurrencies, allows users to opt out of the traditional system and its assets.

Hackers have had a detrimental impact on the crypto industry, stealing billions of dollars annually from exchanges, custodial services, and wallet software users who store their assets in hot wallets connected to the internet.

Some of the most notable hacks in crypto history include Mt. Gox (2014), Coincheck (2018), and Bitfinex (2019). Hackers often use malicious spyware (malware) and viruses through phishing techniques to breach security systems or trick users into revealing their private crypto credentials. To learn more about the largest crypto hacks in history and the aftermath for affected exchanges, refer to our comprehensive list.