The dark side of cryptocurrency has finally come to the fore. The headline-grabbing tale of an Italian man who said he was kidnapped and tortured for weeks inside an upscale Manhattan townhouse by captors seeking his bitcoin is a stark reminder of the threat that wealthy crypto holders face. This alleged attempted robbery, known as a "wrench attack," highlights a sinister corner of the cryptocurrency world: the use of violence to steal digital assets.
The term "wrench attack" originated from an online comic that mocked how easily high-tech security can be undone by hitting someone with a wrench until they give up passwords. However, this is no laughing matter. Wrench attacks are on the rise, and crypto tracing firm TRM Labs' Phil Ariss attributes this trend to cryptocurrency's move into mainstream finance.
"Criminal groups already comfortable with using violence to achieve their goals were always likely to migrate to crypto," Ariss said in a recent blog post. This is a worrying development, especially for wealthy individuals who hold a significant amount of digital assets. Cryptocurrencies like bitcoin offer traders full control over their funds without the need for a bank or permission from a government to buy, sell, or hold it.
The trade-off, however, is that if funds are lost or stolen, there can be no way to get them back. This lack of security and oversight has led to the development of a culture where self-reliance is key among crypto enthusiasts. Securing and controlling one's private keys, which are like passwords used to access one's crypto holdings, is viewed as sacrosanct. A popular motto in the crypto community is "not your keys, not your coins," emphasizing the importance of protecting one's assets.
Transactions on the blockchain, the technology that powers cryptocurrencies, are permanent and irreversible. This means that once a transaction is made, it cannot be undone. Unlike cash, jewelry, gold, or other items of value, thieves don't need to carry around stolen crypto. With just a few clicks, huge amounts of wealth can be transferred from one address to another.
In the case in New York, where two people have been charged, details are still sketchy, including the value of the bitcoin the victim possessed. Stealing cryptocurrency has been around since the early days of crypto, but it's usually done through hacking. North Korean state hackers alone are believed to have stolen billions of dollars' worth of crypto in recent years.
In response to the threat of hacking, holders of a large amount of crypto often try and keep their private keys off the internet and stored in what are called "cold wallets." Used properly, these wallets can defeat even the most sophisticated and determined hackers. However, they cannot defeat thieves who force a victim to give up their password to access their wallets and move money.
The case in New York is the latest in a string of high-profile wrench attacks. Several have taken place in France, where thieves cut off a crypto executive's finger. Experts suggest several ways to mitigate the threats of wrench attacks, including using wallets that require multiple approvals before any transactions.
Perhaps the most common way crypto-wealthy individuals try to prevent wrench attacks is by trying to stay anonymous. Using nicknames and cartoon avatars in social media accounts is a common practice in the crypto community, even among top executives at popular companies.
As cryptocurrency continues to grow in mainstream finance, it's essential for users to be aware of these risks and take necessary precautions to protect themselves. The rise of wrench attacks serves as a stark reminder that no security measure is foolproof, and vigilance is key to safeguarding one's digital assets.