Tuesday, May 1, 2018

Bitcoin Exchange Security- Can Indian Bitcoin Exchange be Hacked?

Can Zebpay be hacked? Does Unocoin have the infrastructure to sustain cyber-attacks? How safe is Coinsecure?

These are some rather common questions among investors and traders in regards to Bitcoin exchanges in India.

The concerns are even more relevant today, at a time, when Bitcoin exchanges around the world are struggling with hack attacks.

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Bitcoin Exchange Security

Admittedly, Indian Bitcoin exchanges haven’t had to deal with cyber-attacks of mass level till now. However, many investors did lose money in instances of hacking. The most notable was that of last year in June 2017.

Also Read: Bitcoin and Income Tax India

Bitcoin India Hack


A Bangalore-based investor, computer scientist by profession, purchased Bitcoin using Unocoin’s mobile app. Following the purchase, he received an email with a password reset link. Subsequently, two transactions were successfully made from his account to another address. Bitcoin worth of Rs 1,20,000 was stolen just like that. How this happened isn’t still very clear. The victim believes the hack to have happened on the Unocoin server. 

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Bitcoin India Hack

As the craze for cryptocurrency peaks in India, such incidents won’t be difficult to find. So a large onus will fall on the exchanges – how robust their infrastructure is, what security measures they have taken, and how much accountability they hold towards their customers in case of such hacks take place.

Recently, one of us received this email from Coinsecure.

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Email From Coinsecure

It’s nice to see one top Indian Bitcoin exchange make proactive attempts to provide its users high account security.

But what about others? Let’s inspect.

Also Read: Top 15 Bitcoin Exchanges in India

Can Indian Bitcoin Exchanges Be Hacked?


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Coinsecure

Coinsecure has 2 wallets: hot wallet (connected to the Internet), cold wallet (not connected to the internet).

It keeps a bulk of funds stored in cold wallet, which is much secured from hacking. It stores a small amount in its hot wallet to facilitate easy trading and quick withdrawal. Storing Bitcoin in the hot wallet isn’t believed to be very safe.

In one of his Quora answers, the Founder of Coinsecure, Benson Samuel, advises users “to hold your own coins. Short term transfers of ownership are risky, but still acceptable after strong amounts of research. However, do not hold more than you could risk.”

In its Terms and Conditions page, Coinsecure has said, “Coinsecure shall not be liable for any loss caused to the User due to any of the risks related to trading in Bitcoins, whether currently known or unknown.”

Also Read: Coinsecure Hacked- Bitcoin Worth Rs 20 Crore Lost

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Zebpay

Coming to Zebpay now. Initially, Zebpay was supposed to be a platform for investors—the long-term investors. However, its recent update has now made trading extremely easy. With that though, sadly, the company didn’t announce or made any official comment on how it’s tackling the rising threats of cyber-attacks. Not a word was said about how it is improving its security end along with the expansion of its operations.

In one of this Quora answer dating back to July of 2017, one of the founders of Zebpay Sandeep Goenka advised users to “use wallets provided by exchanges like ours only to keep small quantity of bitcoins or only when you need to buy and sell…. As advised by some users, the ideal solution is to control your private keys, that is, use a wallet like Bitgo. Or better still, a hardware wallet like Trezor.”

In its Terms and Conditions page, Zebpay says that it has taken all reasonable steps to secure its infrastructure. But it makes sure in case of hacking, cyber-attacks and in any malicious attack, it is not liable to users for their loss of money and cryptocurrency.

Also Read: Why I decided to leave Zebpay (And You Should Too)

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Unocoin

Unocoin is one of the few Indian Bitcoin exchanges that have a dedicated Security webpage where it outlines the way it’s protecting its users. Saying most of the users’ Bitcoins are stored offline, it adds…

“The set of multiple addresses for offline storage are generated on a computer that has never and never will be connected to the internet. This serves as a crucial security measure against theft, loss and hacking. The address-private key pairs obtained are encrypted using AES-256, sealed in envelopes and stored in multiple safe deposit lockers. The AES-256 keys are also stored in multiple safe deposit lockers at different locations. The reason- In the unlikely event of a security compromise at any one of the locations, your Bitcoins remain safe.”

Unocoin also provides tips and recommendations to users for higher safety. However, much like other Bitcoin exchanges, it clearly states in its terms and conditions that the company isn’t liable to users if they lose their Bitcoins in any malicious attack.

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Much like these three top Bitcoin exchanges in India, others too follow the same path. Majority of them haven’t really said anything on the rising threats of cyber terrorists in the crypto-world. None have made any official statement on what extra measures they are taking to protect the money and data of their users.

In lights of recent time when instances of Bitcoins getting stolen and exchanges being hacked is increasing by the passing day, it was need of the moment for top Bitcoin exchanges in India to assure their users and the entire crypto-community. Sadly, they never did.

What should you do?

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How to protect Bitcoin from hackers

We’ve written few tips here on How to protect Bitcoin from hackers. Read and follow.

Aside from that, if you own a large amount of Bitcoin, it is highly recommended that you invest some money in a good hardware wallet. This is what nearly every crypto expert do and recommend.

Because while all those online wallets that claim they are the safest, they aren’t. And when it matters your hard earned money, you’re better off without taking any chance. So invest in a good hardware wallet. There is a handful of them available in the market, on Amazon.

Buy Bitcoin Hardware Wallet


Ledger Nano S is one of the best. It is also an affordable option that comes with a screen. Setting it up is much easier. Know More or Buy Now.

Trezor is the next best option that offers extra protection and verification with passphrase feature. It’s just as easy to set up. Know more or Buy Now.

Both of these wallets support not just Bitcoin but also other Cryptocurrencies. So if you have any cryptocurrency in a large amount, you can lock their big portion in these wallets safely. With the small remaining portion, you can trade.

To make your decision easier, if you own Cryptocurrencies that’s more than 10 times in value of the final price of hardware wallets, you should definitely invest in cold wallets. (For example, if the cost of the wallet is $100, and you own Bitcoin worth more than $1000, which is 10x more, you should definitely buy Bitcoin hardware wallet.)

As Cryptocurrencies inch closer to the mainstream, a lot of challenges will emerge in countering the highly-advanced cyber-attacks from hackers, terrorists and even government organizations. Investors who have taken proper steps will remain the safest.

Also Read: Should You Buy Hardware wallet for Bitcoin

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