Currently, there is a lot of excitement about digital currencies and more specifically, Bitcoin because the price of this digital currency reached $63,000 in 2021; A price that maybe few people thought about at the beginning of the launch of this digital currency. This has made many people think of buying and investing in Bitcoin. But it’s important to remember that investing in Bitcoin comes with huge risks. Over the years, the world of Bitcoin has suffered many hacks, scams and abuses. Users who do not take proper precautions can lose all their assets. Here we have a short history of the biggest Bitcoin scams We present. It’s worth noting that all of these attacks were against Bitcoin-related services and not the mainnet or indeed the Bitcoin blockchain. Blockchain technology, especially Bitcoin blockchain, has many features that make it very unlikely to be hacked.
It should be noted that in the case of Bitcoin , the number of hacks and frauds has been much higher in the past than now, and it seems that in 2011 and 2012, users faced more of these risks. However, the dangers in the present are by no means gone. The field of digital currencies and Bitcoin is still little regulated, and fraud and hacking are a constant threat. Although it may seem tempting to buy Bitcoin in the hope of its value increasing, the risks are too high for many people, and if you decide to buy Bitcoin, you should definitely do your research and due diligence.
Introducing the biggest bitcoin scams in history
August 2010: An additional 184 billion bitcoins were created with the help of a bug
What is most important about Bitcoin is the 21 million cap on its supply. Due to the coding, the amount of newly mined bitcoins will gradually decrease so that for years, what miners will be mining will be small parts of the last bitcoin . While much of how Bitcoin works is open to debate, the supply cap is an integral part of it.
One of the biggest Bitcoin scams was the creation of an additional 184 billion Bitcoins in August 2010 with the help of a bug. At the time, there was no code to check the validity of excessively large transactions . So, a hacker made a transaction by sending 184,467,440,737 bitcoins and splitting it between two addresses and sending an additional 0.01 bitcoins to the miner. However, the hacker was not able to pull it off successfully. Satoshi Nakamoto ‘s team noticed the extra bitcoins and did a hard fork to change the record so it no longer exists. If left unaddressed, this would have fatally undermined Bitcoin’s ability to function, but luckily the fix was easy.
June 2011: Hackers steal $500,000 worth of Bitcoin from a user’s computer
In early 2011, Bitcoin had a small community of enthusiasts. Bitcoin mining was easier back then and people could generate thousands of bitcoins using an ordinary home computer. That’s what Allinvain, a user of the Bitcoin forum, claimed to have done at the time, amassing around 25,000 Bitcoins. Bitcoin was not worth much in 2010, but by early June 2011, the price of Bitcoin had risen to $20 and his bitcoins were worth about $500,000.
Then, on June 13, disaster struck for Allinvain. “I just woke up to find a huge chunk of my bitcoin balance gone,” he wrote. Alinwin believed that someone had hacked into his computer and stolen bitcoins from his hard drive and transferred them to an account controlled by the hackers . If those bitcoins had not been stolen and he had kept them to this day, they would have been worth about $1 billion at the time of writing, making this theft one of the biggest bitcoin scams in history. .
August 2011: MyBitcoins wallet service disappears from the web
Bitcoin wallets provide Bitcoin storage services for users. These services were initially presented as a means of convenience for users, but many of them were either implemented insecurely or ended up being known as scams. (This is difficult to detect, as the schemes identified as scams claimed to have been hacked).
For example, one wallet service that was popular in the early days of Bitcoin was called MyBitcoin. In August 2011, the company disappeared from the web, claiming that the site had been hacked. This incident and similar experiences have made the Bitcoin community suspicious of online wallet services. Without any real regulation, there is no way for users to verify that wallet services are trustworthy.
An exception to this are client-side web wallets such as those provided by Blockchain.info. In these services, customer data is only stored encrypted on the server. Data is encrypted on the client side with a password provided by the client. This approach makes users less vulnerable than traditional wallet services where the service provider directly controls the bitcoins.
March 2012: Hacking of a web host led to the theft of a large number of Bitcoins.
By exploiting a vulnerability in Linode’s online web host, hackers stole at least 46,703 bitcoins—worth more than $200,000—from several Linode users. This included more than 43,000 bitcoins stolen from Bitcoinica, a fledgling bitcoin exchange.
Bitcoinica suffered a second hack in May 2012 that cost the company another 18,000 bitcoins. It was then taken offline due to security audits. Bitcoinica did not survive these events. In August 2012, several users complained to the website and demanded the return of their $460,000 deposit.
One lesson from the Linode debacle is that Bitcoin-related businesses need to be very careful when working with shared hosting providers. Bitcoins are secured with encryption keys. If a third party—either other customers or rogue employees—has access to customer data, they can read the encryption keys and use them to steal bitcoins from their owners.
August 2012: Shutdown of a Bitcoin-based Ponzi scheme
Bitcoin Savings and Trust was a classic Ponzi scheme . Customers were lured in with the promise of high returns – seven percent per week – and deposits from new customers were used to pay interest to previous customers. The scheme was halted in August 2012, and a year later the government indicted the scheme’s founder, Tendon Shavers. The government accused him of collecting more than 700,000 bitcoins from unsuspecting customers. In 2014, a court ordered him to pay more than $40 million in restitution to victims. The court also discovered that the scheme cost victims 265,678 bitcoins.
September 2012: A number of exchanges were hacked/suspended
In September 2012, the Bitcoin exchange Bitfloor suffered a catastrophic attack. The attackers stole 24,000 bitcoins, worth about $250,000. The exchange did not have $250,000 in reserves, so the theft effectively bankrupted Bitfloor.
Bitfloor resumed operations a few weeks later, hoping to collect enough fees to reimburse previous customers, but the effort was unsuccessful. Bitfloor closed its doors for good in April 2013, disappointing its users.
February 2014: The largest Bitcoin exchange at the time was destroyed by hackers
Another of the biggest scams in Bitcoin was the collapse of the Mt.Gox exchange, which was the leading Bitcoin exchange at the time (2014). Mt.Gox, run by French-born CEO Marc Karpeles from headquarters in Japan, was the main way to buy and sell Bitcoin from 2010 until February 2014. In February 2014, the exchange announced that 850,000 bitcoins had disappeared or were most likely stolen by hackers. In early 2014, the value of these bitcoins was around $450 million. Their value today is around 35 billion dollars.
In July, US law enforcement officials announced that they had arrested a suspect in the massive robbery. A Russian man named Alexander Vinik who owned and operated a bitcoin exchange called BTC-e. The Fed claimed that he knowingly accepted the stolen bitcoins from Mt.Gox and cashed them through his bitcoin exchange.
The collapse of Mt.Gox left no trace of angry customers. Ironically, the steady increase in the value of Bitcoin meant that the bankrupt company could eventually repay its debts in full as the money accumulated. Mt.Gox’s assets and liabilities were frozen while the company worked through bankruptcy proceedings. Debts were frozen in Japanese yen, while the company’s remaining bitcoins have risen from $400 each at the time of the bankruptcy to $40,000 today. Obviously, former creditors believed that their claims should be repaid in Bitcoin, but Japanese law was probably not on their side.
January 2015: Bitstamp exchange hacked
In January 2015, the popular Bitcoin exchange Bitstamp reported that it had lost around 19,000 Bitcoins, worth around $5 million. The exchange survived the attack and remains one of the leading Bitcoin exchanges today.
August 2016: Hackers steal 120,000 Bitcoins from an exchange
In August 2016, Bitcoin exchange Bitfinex announced that hackers had stolen $77 million worth of Bitcoins. The company imposed these fees on users, forcing them to drop 36% of the value of their deposits.
Bitfinex is still around but there are big questions about the company’s credibility. As the New York Times puts it: “Bitfinex is an obscure operation that offers no information on its website about its location or who runs the company.”
Conclusion
In this article, we discussed the biggest Bitcoin scams. Of course, there have been other hacks and scams since the last one reviewed in 2016. For example, the sudden and mysterious death of the CEO of QuadrigaCX, the largest digital currency exchange in Canada, and the loss of $190 million in Bitcoin, is one of these cases whose case remains unclear and open. Also, in this article, only the biggest frauds of Bitcoin were mentioned, and to explain and describe the frauds that occurred in altcoins, which after 2016, a large number of them were created and entered the field of crypto, another article or articles should be written.
You must have realized by now that entering the field of cryptocurrency , in addition to trading risks, also has systematic risks, which include the hacking of exchanges and wallets , Ponzi schemes based on cryptocurrencies, and even property theft. Users indicated by the exchanges themselves. Therefore, it is recommended that before entering and investing in this area, you should familiarize yourself with all these risks and take preventive measures such as using offline or cold wallets and working with reputable exchanges that have a good security team to fight against hackers. Apply, do.
