Major cryptocurrency deanonymization event is imminent

Cryptocurrency community is all but ignoring an existential risk that may radically change the whole cryptocoin ecosystem. Read on to learn more.

There were at least 4 hacks of major cryptocurrency exchanges in the last 6 months. Every time exchanges were hacked, tokens were stolen. There are suggestions, not entirely without merit, that some "hacks" were done by the owners of the exchanges.

  • Coincheck lost nearly $500 million in January 2018

  • Youbit lost about 17 percent of total assets in December 2017

  • Bithumb lost more than $1 Million in June 2017

  • BitGrail lost $170 million in February 2018

A reasonable assumption is that personal user data at exchanges is protected at most as strongly as private keys, but probably much weaker.

It is only logical to conclude that in most cases where hackers got access to private cryptocurrency keys, they also got access to private user data.

It is also quite probable that there were a number hacks that weren't made public where hackers were not able to penetrate subsystems managing private keys but got access to private data.

See where I'm going?

At some point, database of one the exchanges containing credentials, personally identifiable information, deposit addresses, balances, withdrawal addresses and individual transactions will be leaked and becomes publicly available.

This should not be surprising to anyone. The security track record of most tech companies is abysmal. The following megacorps had their user databases leaked: Adobe, Yahoo, Linkedin, Dropbox, Tumblr, Badoo, Rambler and many others. That we know of.

Learn more about huge number of private user data leaks at haveibeenpwned.com

Let me put in the simplest terms: it is very probable that your privacy WILL be compromised.

In fact I think that nation-state sponsored hacking groups were already able to get access (probably real time) to databases of at least several major exchanges.

The leak of personally identifiable data will be aggravated by chain analysis and correlation techniques[pdf].

The fact that this threat vector is not being heavily discussed either by core teams of most cryptocurrencies nor general cryptocurrency communities is quite perplexing.

A non-exhaustive list of consequences

  • Fungibility of major cryptocoins is significantly reduced

  • Non-private cryptocurrencies stop being considered as anonymous/pseudonymous

  • Usage and prices of cryptocurrencies (Monero, Zcash) that have strong privacy protections soars

  • DEXes usage and popularity surges

  • Centralized exchanges usage drops

  • Some cryptocurrency whales become vulnerable

  • Major press coverage ( comparable with Panama leaks) of persons of public interest found in the leaked databases

Be prepared and improve your operations security accordingly.

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True
That's why I:

  1. Using only Decentralized EXchanges with 0 personal data given
  2. Considering all my nonprivate crypto assets - compromised already

The privacy is a must for every crypto witch aimed to be digital cash.

Whats your favorite privatecoin @ontofractal ?

Decentralized exchanges are going to become more and more popular!

Yep, and so far my favourite Decentralized exchange is BitShares DEX.

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How tough is it to use a decentralized exchange?

That depends. Some DEXes have okayish user experience, others, like EtherDelta, can be quite punishing.

What you aren't taking into account is that none of the major exchanges tha got hacked had major KYC (know your customer) standards. As such it is very unlikely that any of them had a sizeable amount of legitimate personal data, so even if you are right, its little to be scared about. Now if this sort of thing happened to Coinbase or Bittrex or another major exchange that keeps up with KYC standards, then we will have something to worry about.

It is indeed a big risk seeing those news about exchanges being hacked and millions are being taken and I also feel the same way that personal information might have been taken to but I also have a feeling that the people behind these hacks might be a group linked to the owner of these exchanges also. You're dealing with huge amount of money and for sure your priority should be its security so for me that doesn't make sense and will only lead to one conclusion though nothing was proven yet that it might have been an inside job.

Still feel kind of cool if you got in early... ice hasn't even thawed out yet lol

If half of you is on fire and the other half is in ice.... your a perfect temperature on average ;p

Really hoping this brings the real silent coins- Monero etc- to the forefront. Feel like they've somewhat undervalued at the moment.

Interesting article! Checkout @cryptobroye for more bitcoin info and analysis. Im sure there's a lot we can learn from each other!