ICOs - Big Target For Hackers, E&Y Report
Thanks to Blockchain applications like Ethereum, initial coin offerings have become part and parcel of the cryptocurrency world.
As businesses integrate innovative ideas with Blockchain technology, they’ve been able to raise a large amount of capital through initial coin offerings (ICO) - much like companies that list themselves on stock exchanges in an initial public offering.
The popularity of cryptocurrencies has seen many investors look for the next best thing after Bitcoin and Ethereum prices skyrocketed over the past 12 months.
This has led to a number of ICOs receiving massive capital investments for their projects. But where there is wealth, there is bound to criminal interest - as a recent report from Ernst and Young suggests.
$400 mln in two years
According to Fortune, up to 10 percent of all the money raised by ICOs between 2015 and 2017 was either lost in the crypto ether or stolen in hacks. Putting a number on that amount, we’re talking $400 mln stolen by hackers.
In their haste to attract investors, companies launching Blockchain services often overlook the necessary security precautions needed to protect themselves and investors buying their tokens.
Ernst and Youngs’ report states that over $3.7 bln was raised by 372 ICOs during that time period. That is a massive amount of money for ‘start-up’ offerings, and it’s hardly surprising that hackers are looking for soft targets.
The report states that large ICOs are deemed to be soft targets for seasoned hackers:
“Hackers are attracted by the rush, absence of a centralized authority, Blockchain transaction irreversibility and information chaos. Project founders focus on attracting investors and security is often not prioritized. Hackers successfully take advantage— the more hyped and large-scale the ICO, the more attractive it is for attacks.”
You don’t need to scour the Internet to find stories of ICOs being pinched by hackers. A look back at Cointelegraph’s archives provides many examples.
As reported in August 2017, cybercrimes rose in tandem with the popularity of Ethereum, thanks to its smart contract system which allows developers to create their own decentralized applications on the Ethereum Blockchain.
These hacks have a compounding effect - as Ethereum’s Blockchain bears the brunt of the traffic from an ICO and even more so if there is a stress event around a hack as users look to get their funds out of the project.