Hackers transferred more than $600 million in cryptocurrency from the Poly Network on August 11 into a variety of digital wallets, Reuters reported. The hackers, who are still unidentified, returned $342 million in tokens, which included 12 different cryptocurrencies. At press time, $268 million worth of Ethereum remains outstanding, Poly Network told Reuters. Poly Network, a token-swapping platform, also told Reuters that it was continuing to communicate with the hackers and they were “gradually transferring back the remaining assets.”
What Is Poly Network?
Poly Network, Reuters reported, is a “lesser-known name in the world of crypto.” It is a decentralized finance (DeFi) platform that allows users to transfer tokens across the Binance Smart Chain and the Ethereum and Polygon blockchains. Coin can be transferred by means of a “smart contract,” which issues instructions to release assets to different blockchains, offering liquidity to crypto holders.
How Were the Tokens Stolen?
Reuters reported that the hackers detected a vulnerability in the smart contract, enabling them to divert funds to three digital wallets on the Curve.fi and Ellipsis Finance exchanges.
The fact that the unidentified hackers began returning some of the funds led some to believe that they were acting in a “white hat” capacity, exposing vulnerabilities in the Poly Network so the company could make security improvements and keep future users’ funds safe. However, Chainalysis Chief Technology Officer Gurval Grigg told Reuters it was “unlikely” that white hat hackers would steal so much and it was more likely they returned the funds because it “proved too difficult to convert them into cash,” Reuters wrote.
Is Your Crypto Safe?
The fact that stolen crypto may pose a challenge to use or convert to cash may prove as a deterrent for hackers to steal it. But, as the Poly Network incident proved, it can happen. And it brings up questions as to how safe your crypto may be stored in a digital wallet on a crypto exchange.
Similar to online stock brokerages like Robinhood, crypto trading platforms and digital wallets are not FDIC-insured. That means your funds are not backed by the federal government for up to $250,000 in losses per bank. The safest place to protect funds up to $250,000 against theft is in an FDIC-insured bank account. However, even the best savings accounts are rarely the most profitable way to watch your money grow.
With this in mind, you’ll want to do your research before choosing a crypto exchange or digital wallet.
What To Look for in a Secure Crypto Exchange
It’s important to choose your platform for crypto transactions carefully. Some, like Coinbase, the largest crypto exchange in the U.S., carry insurance against theft. You also want to make sure that the exchange you choose uses 2-factor authentication, or 2AF, as added protection against hacking.
The Motley Fool advises that crypto is also safer if it’s stored off the network, using a system called “cold storage.” Simply put, anything that resides on a network can, theoretically, be hacked. Crypto exchanges must keep some coin on the network, ready for exchange, but the majority should be stored offline.
For instance, Coinbase notes that the majority of their funds are either stored in custodial accounts in U.S banks, invested in liquid U.S. Treasuries or stored in money market funds.
If you’re considering keeping your funds in a digital wallet, consider a hard-drive-based wallet that you can remove from the network when not in use. Of course, you’ll want to keep your “cold wallet” protected from physical theft — and make sure to keep your password in a safe place where you won’t lose it but no one else can gain access to it.
You don’t want to be like Stefan Thomas, who forgot the password to a crypto wallet holding more than $220 million in bitcoin.
More Tips To Protect Your Digital Assets
Keep in mind that even exchanges that carry insurance will not protect your funds if someone hacks into your account directly.
- Setting a secure, hard-to-guess password and keeping it safe
- Only logging into your account via secure, private networks
- Keeping tabs on your account so you’ll notice any unusual activity
You want to treat the login information for your digital wallet and crypto exchange — as well as any stock trading platforms you use — with the same care that you protect your online banking information.
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Last updated: August 12, 2021