Cryptocurrency has lately been at the forefront of a lot of scams. It has been the very tool which has allowed scammers, thieves and hackers to all be able to net huge profits without getting caught. Just recently on March 24th, there was a flash loan attack on One Ring Protocol which allowed the scammers to walk away with $1.4 million. The stolen funds were turned into a tumbling protocol, or in other words, it made the funds impossible to track as it made the transaction history obscure. Which brings to the question, does cryptocurrency have the same integrity as fiat currency moving forward?
Why do criminals prefer crypto currency?
The use of fiat currency is a highly regulated system. It is a fairly old system and is something familiar to everyone. Cryptocurrency on the other hand is still very new, decentralized, meaning no governing body controls it, and is somewhat complicated. For those reasons there are lots of different ways to exploit crypto currency in order to conduct criminal activities.
One of those ways include using the anonymity feature which allows the identities of transaction makers to remain unknown. While transactions that occur on the blockchain are public record, that record only includes the addresses involved in the transaction. Meaning criminals can seemingly trade whatever they want without being linked to their crypto address. This including the fact that there are no third parties involved as a mediator means this transaction cannot be stopped or reversed. The transaction itself is also very easy, lightning fast and doesn’t take up any space as cryptocurrency is a digital asset. All that is required is an internet connection, a wallet application and people can simply transfer millions across borders and store those millions without any issue unlike Pablo Escobar.
What is a Flash Loan?
Flash loans are loans, where a borrower is lent money, and that money is expected to be paid back. However, unlike a regular loan from a bank, flash loans are uncollateralized and make use of smart contracts which are digital agreements which are cemented on a blockchain network so if the agreement of the contract is breached, the funds go back to the lender. Flash loans are only lent for single transactions and must be paid back before the end of the transaction. So if not paid, the transaction never goes through and money goes back to the lender. These loans are generally used by traders and crypto investors in order to make trades and invest with huge leverage which are otherwise not allowed using regular fiat currency. Because of the lending mechanism and thanks to smart contracts, it is impossible on these loans as transactions essentially just “resets”.
So what exactly happened?
How the attackers were able to steal $1.4 million was actually because of price manipulation, assisted by flash loans which drove large amounts of OShare tokens out of the protocol by exploiting some functions of the loan contract. A protocol is a basic set of rules that allow data to be shared between computers. OShare tokens were then moved from Fantom back to Ethereum and again into Tornado Cash. As per the smart contract used, it was developed to self-destruct after the transaction so others cannot track what and how the attackers actually exploited the system in order to steal the 1.4 million. Due to the funds disappearing into tornado cash it limited anyone from stopping the withdrawal of those funds.
Conclusion
While this sort of attack is very complicated and not a big concern for the majority of people, it does question the integrity of crypto currency and its technology moving forward. Crypto is gaining the interest of more and more people everyday. With the hopes it will soon replace fiat currency. However with the unregulated nature of crypto currency, these attacks show there is still a long way to go before the public even remotely trusts this technology to replace fiat currency as security is still a big concern with cryptocurrency.
Source;
https://medium.com/oneringfinance/onering-finance-exploit-post-mortem-after-oshare-hack-602a529db99b
As much as computer science and regulation are often at odds with eachother (for good reason), this is part of a long list of examples of why crypto currency probably needs some. Not only are individuals using crypto put at great risk of attacks with little to no recourse, but many illicit activities and payments can be done with the currency as you mentioned. It seems that whether crypto currencies are secure or not has no bearing on whether criminal activity will occur, rather just the kind.
I do find this method of stealing interesting though. Using price manipulation and some inherent crypto vulnerabilities seems like a very smart way to get money, and hiding their tracks afterwards opens the door to doing it again if the hole can’t be plugged. Would be interested to see how attacks like these develop in the future, if not this specific story (because if the attackers are at all smart, and made no mistakes covering themselves, I doubt we will hear much more about the incident).
I think despite its anonymous nature, cryptocurrencies still provide more transparency than regular fiat. For example, after 6 years, the Bitcoin stolen from the Bitfinex hack was linked to a couple trying to launder the money. There are many exchanges that require KYC (know-your-customer) that are fiat on and off-ramps and thus will hinder these thieves’ ability to use their newfound wealth.
Although cryptocurrency has become increasingly popular in recent years, it also appears to be the preferred medium for criminals to exploit. For example, criminals can hack investors’ crypto wallets and steal their currency, which is a relatively tame activity in comparison to other common cryptocurrency scams. Criminals can also establish illegitimate wallets to bilk counterparties, and they can establish phoney crypto exchanges to steal money. But the egregious depth of the cryptocurrency scam highlighted in this post, emphasizes that safety must be an utmost priority when dealing with cryptocurrency. However, the scale of the crime also incites fear and anxiety. It really makes you wonder if using cryptocurrency is worth the high-risk associated with it. Maybe it’s safer to stick to conventional practices?
Hi, this was one of the topic I really wanted to know about! With crytocurrency being so popular among these days, it is crazy how there are so many scams happening when associating them. It was interesting reading about these methods these scammers use to hack thorugh and steal the crptocurrency!
Cryptocurrencies, despite their anonymity, I feel, provide greater transparency than traditional money. For example, Bitcoin stolen from the Bitfinex hack was linked to a couple attempting to launder the money six years later. Many fiat on-ramps and off-ramps need KYC (know-your-customer), which will prevent these crooks from profiting from their newfound money.
The problem with cryptocurrencies today is that it is still strongly decentralized, despite crypto’s longstanding popularity for the last couple of years. Many governments have been very slow to pass legislation to address this new financial system and it’s considerably easy to exploit by cybercriminals. Since it lacks checks and balances and an involved third-party, criminals can move their finances without much interference, or even steal these kinds of funds from innocent crypto users. Only recently has the Biden Administration passed legislation to try and regulate the crypto market, but this is very late. As things stand, criminals will continue to exploit and manipulate the crypto market in new creative ways. It is still primarily the individual crypto user that must remain vigilant and ensure their own security.
Interesting Post! The issue with cryptocurrency today is that it is still emphatically decentralized. It’s significantly simple to take advantage of by cybercriminals. Since it needs governing rules and an elaborate outsider, hackers can move their funds, or even take these sorts of assets from people. It’s highly not reliable since we still need to do research and the worst part is kids in middle school and high school and no or few knowledge about this and they may be led to scams and can cause huge problems for their family.
Great topic to talk about! I was recently considering to get involved in crypto mining but I was not sure about the risks which come with it. Now I know a lot more about the security issues crypto has with it. As you said crypto is getting popular day by day, the risks however are not. There needs to be more awareness about the potential impacts it can bring with it. On the other hand people who are interested in crypto mining should fully research the field beforehand so they are aware of the potential risks.
This is a great article! Because cryptocurrency is so popular these days, it’s not so astonishing to see how many frauds are associated with it. However, cryptocurrency will eventually replace conventional cash. With the uncontrolled nature of crypto money, these attacks demonstrate that there is still a long way to go before the public trusts this technology to replace fiat cash since security remains a major worry and concern for the public.
Even though crypto currency is under heavy fire by the hackers, especially since the huge crypto boom, I believe it is the way of future payments. It’s certain that it cannot compare to the well settled system of fiat currency but it will certainly improve in the future.
Though, I have to admit, the way they stole this money is insanely smart, especially as now they can’t even be tracked, so they got away with barely any risks. Though I believe that’s the risk which comes which crypto currency is justified with the freedom it given us.
Great post! With cryptocurrency on the rise and still being relatively new, it’s expected that many with harmful intentions would try to exploit this technology/currency. While this is obviously a bad thing, it’s also interesting to see what attacks these people can create and how they would be dealt with in the future.
Hey, nice post. It seems like most cyber-attacks I read these days are connected to crypto currency in some way. Despite the fact that bitcoin is becoming increasingly popular, it appears to be the best platform for cybercriminals to target individuals. Despite the recent growth of cryptocurrency, the problem with cryptocurrencies today is that they are still extremely unstable. Governments that have allowed cryptocurrency to flourish must move faster to find a better solution for everyone. As a result, thieves may simply hack into cryptocurrency wallets and steal funds from investors, which is a relatively minor crime compared to other common cryptocurrency frauds. As things stand, anyone interested in crypto mining should do their homework ahead of time to ensure they are aware of the risks.
With cryptocurrency being so new, I can 100% believe that there are possibly many (possibly infinite) ways to steal crypto and not be caught. Cryptocurrency is such an interesting technology, but I find it hard for it to be the future of our economic system, like many seem to preach. It could be *an* avenue of commerce, but not *the* avenue of commerce, there’s just to many unknowns to the technology, and I feel like it’s a hard technology to understand (see the cryto-bro stereotype). I’m curious to see in what ways people will use (and steal) cryptocurrency in the future. Will it be big operations and sneaky plans like we see in Ocean’s Eleven, or will it just be a couple of dudes and a some laptops? I think interest will continuously grow for cryptocurrency, but the amount of security around it may lag behind how fast interest will continue to grow.
I definitely agree with you when you say that cryptocurrency still has a long way to go before the public gains trust in it. I believe that this blog post along with many others that talk about the dangers of cryptocurrency are very important because they show us proof that these kind of scams and thefts could happen to anyone. I think its great that many people are now starting to focus on the dangers of crypto and are actively trying to educate themselves and others on this new technology that is changing the way we think of currency and transactions in general. While I have seen other posts talking about a similar theft, I believe this is the first one that talks about flash loans and how they could be dangerous. Great blog post.
I think that this post involves a lot of information about anyone who will be getting into crypto. With the increasing demand of blockchain and blockchain development, it is very easy to realize tat attackers will always be trying something unique to steal data based on the information that directs more traffic on the internet. It is very important monitor certain aspects of crypto such as smart contracts, just to make sure that there are no vulnerabilities included while these are sent online. thanks for the post!
Hey, great post! I liked how you highlighted how thieves were able to get away with the robbery. I think it was a very creative way of doing something like this. I own crypto and this brought up some interesting issues I need to stay vigilant of. The idea of the attack was quite interesting as well since it involved complicated concepts such as price manipulation etc. Clearly, it shows the importance of smart contracts and strong implementation to prevent any similar attacks in the future.
With the increase in popularity in crypto in recent years there are always going to people that go into it without doing their research and taking steps to protect themselves. It seems that security mechanisms and attacker discovery techniques have not advanced in proportion to the interest.
Great post. Since cryptocurrency has become so popular in today’s age, it’s common to see these types of frauds and attacks now. It’s opened up a new opportunity for hackers. I do still believe that even with all this going on, cryptocurrency is still the move. In the future, everyone will move from traditional cash to cryptocurrency. I am thinking about investing in some cryptocurrency as well since I’ve heard you can make lots of money from it.
Good topic to talk about! Cryptocurrency has become very popular in recents times. I have always thought about investing in crypto, but I have never done it because of the risks that come with it. Crypto is still pretty new in the market and is not yet centralized. There needs to be more awareness about the potential risks when investing in crypto.
Very informative post! I had always liked the concept of a decentralized digital currency and it has a lot of potentials. Back in the day, telling people that you invested in crypto made people laugh and nowadays it has gained a lot of public support as more and more people have become aware of it. This gives scammers more ways to scam and the fact that cryptocurrency is a rather new and confusing form of trading, people are more susceptible to being manipulated easily.
I personally get vast numbers of annoying messages from these scammers on social media where they try to coerce me into sending them bitcoin. I’ve learned how to spot this fraudulent behaviour but I suspect a lot of people don’t. The other day my friend’s phone got hacked and the hacker started posting stories on his Instagram account advertising their get rich quick scheme and unfortunately, a couple of his followers even fell for it. These crypto scammers somehow get away with such tricks, which is rather sad and disappointing. I think there should be more awareness campaigns to inform people about these incidents.
Thanks for sharing such an informative blog post! With the current growth of cryptocurrency, I think more people need to be aware of such dangers. People get sucked in thinking it’s easy money, however they are unaware of all the lack of security it has. Informative posts such as these can go a long way for someone looking into crypto.
Cryptocurrencies have been very popular since their inception. Prices are also rising. Its anonymity is a very important feature. Yet the logic of decentralisation leaves the currency insecure and unregulated. Cryptocurrencies are now a means of money laundering. If money transfers are all anonymous, who will guarantee cryptocurrencies when they are legal tender? Very good post.
While I understand the risk posed in performing transactions in the crypto world, I personally think there is an equal if not greater risk posed with traditional fiat currency. I don’t see how a few high-profile hacks now and then (although I may underselling this risk) equates to the amount of widespread damage that can be caused by large centralized financial firms (ex: 2008 crash). I understand that the crypto world is still not perfect (sketchy users, sketchy exchanges, sketchy projects, volatile prices, hype and sh*tcoins) but at least it’s an attempt at something different. Where there is the opportunity for crime, there will be criminal activity, at least for the foreseeable future. To me, regulatory bodies are just as subject to criticism as decentralized platforms. The only difference is one has significant legal power (backing via lobbyists etc) and one doesn’t. This to me is more concerning than the risk of monetary loss. Centralization allows for centralized risk, decentralization sort of means you’re on your own (kinda).
Interesting post, and I think another reason why criminals like crypto so much is because of how volatile the market is. Because in 2016 a couple stole about $70 million worth of bitcoin and now that same amount is worth about $3 billion.
Great post! With the way the world is moving towards a technological age, I wonder if the laws surrounding it are keeping up. This is why cyber-security is so important, it’s to protect.
Interesting post, As a new thing now, cryptocurrencies have attracted the attention of many people and hackers. The main reason is that cryptocurrencies are not strictly regulated by the state like traditional currencies.
This was a really good and informative post. As the technological world advances, I have noticed a lot of people starting to invest in cryptocurrencies but I am glad I never had the interest to do so myself. A lot of people still are unsure about the whole cryptocurrency scene, so I believe hackers and scammers would definitely try to take advantage of such a situation. I know a lot of youtubers who got involved in a lot of shady crypto-scams and it definitely was not worth it in the long run. They promoted these scams (part of the deal to get some cash) and the fanbases fell for it. In the end, these content creators just lost a lot of fans as well as credibility which is definitely bad for the long run.
I liked this post a lot. Great job!
This was a great read! I am not super in the know about the crypto currency space and I had never heard of flash loans. I think they are really interesting and I think I will do some more reading about them. From what I understand right now they can be really useful when purchasing crypto but they have a few flaws.
Good Post! You make a good point regarding how this robbery questions the integrity of cryptocurrency and its technology. Many have seen cryptocurrency as the future of all currency, with how fast, usable, and capable it is (as you’ve mentioned), and with support for Crypto gaining steam every day, security regarding it is as important as ever. If Crypto has any hope of ever replacing regular currency as the norm, it will have to undergo massive and sweeping security upgrades before it even thinks of being used on such a massive scale.
Cryptocurrency was founded on the basis of integrity and security. The problem is that transactions are difficult to trace and complex attacks like these make it even more difficult to regulate.
It seems like anytime there’s bad news about cryptocurrencies it’s always either someone (or some group) get millions of dollars stolen, or some cryptocurrency tanks in value. I think crypto still has a long way to go before it replaces fiat currency. Unless somebody is willing to take massive risks with their money (both in terms of financial security and in cyber security), it doesn’t appear to be worth investing much into crypto.
This is an interesting post. Cryptocurrency lacks the control of management organization, which leads to great risks in cryptocurrency. The security of cryptocurrency still needs to be improved, because hackers steal people’s money through price manipulation. Therefore, the practice of cryptocurrency replacing traditional cash needs to solve more problems. I think the cryptocurrency system will be improved and more secure in the future. But now, it is very necessary for us to be vigilant to protect our own money and security.
A very interesting post! With crypto still being relatively new it makes sense that people are finding new ways to exploit it. Although they might’ve been able to obfuscate their methods, hopefully people will be able to create regulations to prevent any more incidents such as this from happening. Without these issues being solved, it’s unlikely that more people will adopt cryptocurrency at least over fiat currency.
This is an intriguing subject! Today’s problem with cryptocurrencies is that it is still firmly decentralized. Cybercriminals may take advantage of it rather easily. Hackers can shift their finances or even seize these types of assets from individuals since it requires regulating regulations and an elaborate outsider.
Interesting post!. A lot of people hold the “wild-west” sensibilities of crypto as one of its major selling points, yet here we also see a bit of a reason for regulation in the field. In your opinion, should this remain a system of caveat emptor i.e. buyer beware, or would sacrificing some of the anonymity and unregulated appeal of crypto be a good idea in the interest of safety and reliability?
Very insightful post! Personally after learning more about cryptocurrency and how it works, I’ve come to like it more, and I think it is a really good, modern currency that has little regulation. However, this is also one of its biggest issues. As you mentioned, there is no regulation for cryptocurrency like they have for fiat currency, and because of this, it is easy to use cryptocurrencies for illegal business, and even for theft. In my opinion, it would be a good idea to at least have a little bit of regulation on cryptocurrency, such as government backed security for it or something so that events like this don’t occur again. Nice post!
Really interesting post! I don’t agree that this will harm the integrity of crypto. I believe that this is just one of the necessary steps in cryptos development. If you compare crypto to fiat currency these types of scams I suspect that the volume of fiat scams is significantly higher than crypto due to the abundance of fiat and the ease. A scam like this would take several sophisticated individuals to pull off and patched right away but fiat scams wouldn’t as there is the physical money in play. This kinds of reminds me of old movies where people rob physical gold and run away with it but digitally of course.
Interesting post! I’ve found that since cryptocurrency is fairly new there is a lot of grey area or a lot of uncharted territory and perhaps slaw that can govern or provide some structure. Combines with the scarcity we have on security laws in general this is definitely and yea which requires growth and expansion in order to truly become the currency of the future.
It’s quite concerning how such a large sum of money can be able to be stolen through cryptocurrency. I assumed that crypto would be more secure, but after reading this post I think my opinion has changed. Especially since it is the working currency on networks such as Tor, if someone were to go on the dark web, it would be quite scary to see their information go in the wrong hands. Overall, really good job on the post!! Very interesting subject.