India’s Rs 19-Crore Bitcoin Theft: How Secure Are Your Cryptos?
Here’s how you can prevent your Bitcoins and other cryptocurrencies from being stolen.
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Cryptocurrency investors in India were in for a rude shock on 10 April, with those who had their Bitcoins stored in wallets with Coinsecure waking up to find their pockets picked.
According to an FIR filed by Coinsecure with the Cyber Cell in Delhi, 438.318 Bitcoins, worth Rs 19 crore were reportedly stolen.
Cryptocurrency has been a grey area in India for a while. Officially, the Reserve Bank of India has stopped Indian banks from dealing in virtual currencies. At the same time, it also plans to introduce its own cryptocurrency (which it hopes to regulate).
What Happened?
If you have to invest in cryptocurrencies, you need to create a cryptocurrency wallet. This was the service that Coinsecure provided. Each cryptocurrency wallet has two sets of keys (a long string of code), that you are provided when you sign up. One is a public key, and the other is a private key.
If you have to transact with cryptocurrencies, you will need to share your public key, which is also your wallet address, with the seller/buyer on a cryptocurrency exchange or in a peer-to-peer manner.
You should never ever share your private key (which is akin to sharing your PIN number) as this gives anyone full control of your wallet.
In Coinsecure's case, somebody had access to all the private keys of investors (the company suspect's it is an inside job). Using that, the person(s) emptied out the Bitcoin wallets of about 11,000 of Coinsecure's customers.
Can The Bitcoins Be Traced?
Cryptocurrencies ensure anonymity, although every single transaction is visible to the entire network – anonymously. And there is no single regulator for it. Hence, while the Bitcoins would easily be traceable, no one would be able to figure out who owns it – as it just exists as a string of code on the web, ratified by everyone with access.
Coinsecure has offered a reward of Rs 2 crore to whoever can help retrieve the lost Bitcoins. That's not going to be an easy task, owing to the highly encrypted nature of the cryptocurrency and the use of blockchain technology. Even if the Bitcoins are traced, they cannot be claimed unless the person holding them exposes his/her key.
This is the reason such cryptocurrencies were used on the Dark Web and for drug trade, as it was near impossible to track transactions that technically are in plain sight to the entire network.
How to Keep Your Wallets Secure
Trading in cryptocurrencies in India is difficult as the RBI has virtually banned trade in cryptos. However, if you own a cryptocurrency wallet, you would have a set of keys to your wallet (two crucial strings of code). The private key code among these is something you need to keep securely.
Also whenever you access your cryptocurrency wallet, there are multiple steps to log in. Do not use your private key to log in. Instead, use a keystore file (a set of code that you download and store, and upload each time you login – sort of like a virtual access card) or a mnemonic phrase.
Do not share your private key with anybody. In fact, some sites recommend not even storing it on your computer, but printing it and keeping it offline.
Meanwhile, Coinsecure has offered to compensate its customers within the next 15 days even if the Bitcoins are not traced.
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