Bitcoin Hacking Scare Puts Paranoia In Spotlight

It was the sort of bad news that account owners hate seeing at the beginning of their day.

Last Sunday, a thread was started on Bitcointalk by an individual with a username Saintpaladin18, offering the database files of LocalBitcoins for the price of 0.5 BTC. Believed to contain data until April 20, the file being offered also includes the personal data of more than 700,000 users.

The post caused the users to be alarmed. LocalBitcoins may not act as the intermediary for exchanges on their site, but personal data like usernames and passwords posit a huge breach of privacy. This magnitude of the supposed hack proves to be larger to those users who use the same or similar passwords for their other accounts, which are also in danger of being accessed and compromised.

Fortunately for the many users of LocalBitcoins, the entire fiasco was a hoax. While the said users could not have been more thankful for being spared from the attack, this magnified the effect and the paranoia Bitcoin hacking incidents cause.

Bitcoin vulnerability to online hacking

Bitcoin is quite vulnerable to hacking attacks. Although the cryptocurrency itself cannot be directly affected because of the strong cryptography and the blockchain protocol, other parts of the system are not as robust against an attack.

For instance, intruders can find account data they can use to transfer amounts from one Bitcoin wallet to another, essentially stealing the money.  There have been several major hacking incidents in Bitcoin’s short history that have made many Bitcoin users fearful of major hacking incidents, fraud, and other misdemeanor.

One of the biggest controversies was in 2014 when Mt.Gox was supposedly hacked. This was quite pivotal because Mt. Gox was the largest Bitcoin marketplace at the time, processing over 80 percent of the world’s Bitcoin transactions. It became clear later on that the Mt. Gox scandal was an inside job.

The successful heist netted the digital thieves over $460 million and brought about the closing of Mt. Gox. The real casualty, though, was Bitcoin. After the hack, the price of the cryptocurrency collapsed, with Bitcoin prices halving within the year.

Spate of Bitcoin hacks

With Bitcoin’s history with hacking attempts, it is understandable that many would panic from such a post. To add more fuel to the fire, this hoax comes on the heels of a recent Bitcoin hacking incident. ShapeShift, a popular instant cryptocurrency converter, had to recently beef up its security protocols to foil thieves with inside information from stealing from the site.

Another successful hack would be detrimental to the community, shaking the faith of many Bitcoin users. This is why it is fortunate that the LocalBitcoin hack was only a hoax. It did highlight the need for better security for Bitcoin establishments, though. This, therefore, should be a warning call to many Bitcoin sites who store sensitive data. Increased data security is paramount if they want to keep attracting clients and preserve the potential of Bitcoin to grow.