Cryptocurrency and its importance for hacking

One problem has long plagued bank robbers and drug traffickers. How are huge sums of money transported and hidden without being detected?

27-04-2022 - 5 minute read. Posted in: hacking.

Cryptocurrency and its importance for hacking

One problem has long plagued bank robbers and drug smugglers: how to transport and hide huge sums of money without detection.

In recent years, hackers have found an almost perfect solution - cryptocurrency. It's both fast and easy. And best of all, it's virtually anonymous and very difficult to trace.

What is cryptocurrency?

Cryptocurrency is a digital payment system that doesn't rely on banks to verify transactions. It is a peer-to-peer system that can enable anyone, anywhere, to send and receive payments.

Instead of being physical money carried around and exchanged in the real world, cryptocurrency payments exist solely as digital entries into an online database that describes specific transactions. When you transfer cryptocurrency, the transactions are recorded in a public ledger and the cryptocurrency is stored in digital wallets.

Cryptocurrency gets its name because it uses encryption to verify transactions. This means that an advanced type of encryption is involved in the storage and transfer of cryptocurrency between digital wallets. The purpose of the encryption is to provide security to those who own the cryptocurrency.

The first cryptocurrency was Bitcoin, which was developed in 2009 and is still the best known today.

How does cryptocurrency work?

Cryptocurrencies are a type of distributed, public database called a blockchain that records all transactions, which are updated and stored by cryptocurrency owners.

Units of cryptocurrency are created through a process called "mining", which involves using computer power to solve complicated mathematical problems that generate "coins". Users can also buy currencies from brokers and then store and use them using crypto wallets.

If you own cryptocurrency, you don't own anything physical. What you own is a kind of key that allows you to move a unit of measure from one person to another without the involvement of a third party.

Although Bitcoin has been around since 2009, new cryptocurrencies are constantly being created and the use of blockchain technology is still evolving.

Examples of cryptocurrencies

There are thousands of cryptocurrencies and the number is growing. Some of the most well-known include:

Bitcoin:

Bitcoin was developed in 2009 and was the first cryptocurrency and is still the most widely used today. The currency was developed by Satoshi Nakamoto, who most assume to be a pseudonym for a person or group of people whose exact identity is unknown.

Ethereum:

Ethereum was developed in 2015 and is a blockchain platform with its own cryptocurrency, called Ether (ETH) or Ethereum. It is the most popular cryptocurrency after Bitcoin.

Litecoin:

This currency is most similar to Bitcoin, but has been much faster to develop new features, including faster payments and processes to allow more transactions.

Ripple:

Ripple is a distributed ledger system that was developed in 2012. Ripple can be used to track different kinds of transactions, not just cryptocurrencies. The company behind it worked with various banks and financial institutions before developing Ripple.

Cryptocurrencies that are not Bitcoin are generically referred to as "altcoins" to distinguish them from the original.

Cryptocurrencies and cyber threats

Cybercrime involving cryptocurrencies is on the rise. Cryptocurrencies enable anonymous and secure transactions that are not restricted by national borders and do not require trust between the parties involved.

This opportunity is a dream for hackers, which is why more and more hackers have ditched other forms of transactions and are doing everything in cryptocurrency.

It is unknown when the first hackers started using cryptocurrency, but cryptocurrency was used relatively quickly after 2009 on the dark web by websites like 'The Silk Road'.

Today, there are many types of fraud involving cryptocurrency. They include:

Fake websites: Websites with false claims about cryptocurrency that guarantee big returns as long as you keep investing.

Virtual pyramid schemes: Cybercriminals promote non-existent opportunities to invest in digital currencies and create the illusion of huge returns by paying off old investors with new investors' money. One fraud operation, BitClub Network, collected more than $700 million dollars before the criminals behind it were indicted in December 2019.

"Famous" investors: Scammers pose as billionaires or other famous people who promise to multiply your investment in a cryptocurrency, but instead they steal what you send.

They may also use apps or chat rooms to start rumours that a famous businessman is backing a bestmt cryptocurrency. Once they've persuaded investors to buy, while driving up the price, the scammers sell their stake and the currency falls in value.

Online dating scams: The FBI is warning of a trend in online dating scams in which cybercriminals persuade people they meet on dating apps or social media to invest or trade in cryptocurrencies. The FBI's Internet Crime Complaint Center filed more than 1,800 reports of crypto-focused online dating scams in the first seven months of 2021, with a total loss to victims of $133 million dollars.

Additionally, cybercriminals may pose as legitimate cryptocurrency traders or set up fake exchanges to trick people into giving them money. Another form of crypto fraud involves fake sales of retirement accounts in cryptocurrency.

Of course, there is also very simple and "straightforward" hacking of cryptocurrencies, where cybercriminals force their way into other people's digital wallets.

Author Sofie Meyer

About the author

Sofie Meyer is a copywriter and phishing aficionado here at Moxso. She has a master´s degree in Danish and a great interest in cybercrime, which resulted in a master thesis project on phishing.

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