Thursday, 23 November 2017

THE RISE OF CYBERCRIME ON ETHEREUM

The first major cybercrime incident on Ethereum was in June 2016.

A bug in “The DAO” smart contract was exploited and $74 million out of $150 million invested was drained by the attacker. This year, $1.6 billion has been invested in ICOs on ethereum but the cyber criminals have also generated more than $150 million in revenues. Meaning, 10% of Ethereum holdings marked for ICO investment lies in the hands of criminals. Chainalysis estimates that there have been approximately 30,000 victims of cybercrime on Ethereum losing on average $7,500 each.

 

The Rise of ICOs and the Ether Thieves

What is Ethereum? Ethereum is a decentralized computing platform that extends the basic payments in Bitcoin to include a rich programming language that facilitates smart contracting and negotiations. People can purchase its native currency, “Ether”, to make payments or enter complex agreements that mimic real world contracts. One of the most popular forms of contract, today, are tokens that are redeemable for specific types of services ranging from identity verification to distributed storage or even your attention.

Over 800 tokens have been issued on top of the Ethereum platform since its launch in 2015. The issuance of these tokens are referred to as ICOs (Initial Coin Offerings) and they have attracted $1.6 billions of investment. In 28 days, The DAO sold more than a billion DAO tokens, worth $150 million. Two weeks later, someone took advantage of a vulnerability in the DAO and stole $74 million from 11,000 victims.

Being the first big ICO, the DAO exploit impacted more than 40% of all ICO funds on Ethereum (which was $177 million at that time). Since then cybercrime as a percentage of ICO funds raised has decreased to approximately 10% in the past year.

The rise of cybercrime on Ethereum has risen in tandem with the big ICO financing, with total cybercrime revenue rising from $100 million in June to $225 million in August this year.

 

Bugs are just the bait, watch out for Phishing

The common cybercrimes on Ethereum can be categorized into four categories: exploits, hacks, phishing and ponzi schemes. The highest grossing exploit was the DAO, but another $30 million was stolen from the Parity wallet in June 2017. While some cyber criminals have opted for high profile hacks and exploits, phishing is actually driving the most revenue today. It now makes up more than 50% of all cybercrime revenue generated this year ahead of exploits which sometimes get the most coverage in the press due to their nature.

Fortunately, developers’ abilities to write secure smart contracts seem to be improving as large thefts through exploits are decreasing in frequency. However, ICOs are typically time sensitive and access to the sale requires investors to hastily trade their Ether for the alternative digital tokens. Investors that are desperate to get early access to new token offerings have been tricked into providing their credentials to fake websites through targeted email campaigns, twitter posts and slack messages. These credentials are then used to drain accounts. The average financial loss incurred per victim has increased by 20% from $6,700 in June 2016 to $8,000 since the DAO.

Since the DAO of time...

The public nature of the blockchain allows third parties, such as Chainalysis, to observe and analyze trends in the usage of cryptocurrencies and provide solutions to protect the integrity of these assets. As the market grows in size and maturity, solutions to monitor and extract intelligence from these networks have become critical to ensuring their safe and sustainable development.

 

Some simple security tips when investing

 

  • Beware of inbound messages from services, try to always bookmark the services that you regularly visit and do not click on advertised google results
  • Beware of direct messages in Social medias and Slack forums as companies in general communicate messages in public
  • Messages from slackbots should be treated carefully as these messages can be easily triggered by an adversary
  • Do a background check e.g. use the list of Ethereum scams in the Ethereum Scam Database

 

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