From Hodl to Heist: Analysis of Cyber Security Threats to Bitcoin Exchanges

Bitcoin is gaining traction as an alternative store of value. Its market capitalization transcends all other cryptocurrencies in the market. But its high monetary value also makes it an attractive target to cyber criminal actors. Hacking campaigns usually target the weakest points in an ecosystem. In Bitcoin, these are currently the exchange platforms. As each exchange breach potentially decreases Bitcoin's market value by billions, it is a threat not only to direct victims, but to everyone owning Bitcoin. Based on an extensive analysis of 36 breaches of Bitcoin exchanges, we show the attack patterns used to exploit Bitcoin exchange platforms using an industry standard for reporting intelligence on cyber security breaches. Based on this we are able to provide an overview of the most common attack vectors, showing that all except three hacks were possible due to relatively lax security. We also show that while the security regimen of Bitcoin exchanges is not on par with other financial service providers, the use of stolen credentials, which does not require any hacking, is decreasing. We also show that the amount of BTC taken during a breach is decreasing, as well as the exchanges that terminate after being breached. With exchanges being targeted by nation-state hacking groups, security needs to be a first concern.

I. Introduction

With an average market capitalization of 136 billion USD over the last two years [1], Bitcoin transcends all other currencies in the cryptocurrency market space. Similar to other currencies, security is a critical property in securing its role as a store of value, unit of account and means of exchange. Owners have to be confident that they won’t lose their funds or they will withdraw them. While the developers of Bitcoin’s reference implementation, Bitcoin Core, acknowledge that certain attack vectors exist [2], their probability is low as long as honest Bitcoin nodes together control more processing power than any group of attacker nodes [3]. Due to its implementation of a stack of cryptographic technologies, Bitcoin is a safe and reliable digital currency in its core. This paper will not review fundamental attacks on Bitcoin’s distributed ledger technology, but considers another type of attack that has been proven most lucrative and continues to be.