The craziest crypto scams and hacks: Part 1: How Mt. Gox lost $50bn in a Bitcoin hack - Crypto in Plain English - Episode 125 - by cryptohunt.it

The craziest crypto scams and hacks: Part 1: How Mt. Gox lost $50bn in a Bitcoin hack

Welcome to the cryptohunt jam where we spend one minute a day to explain crypto. In plain english.

This week we will take a look at the fascinating stories behind some of the largest crypto hacks and scams.

Today, let's talk about one of the craziest of them all: How Bitcoin exchange Mt. Gox lost almost 7% of all Bitcoins, which would be over $54 billion US dollars today.

It all started harmlessly. In 2006, Jed McCaleb, who later become the cofounder of both Ripple and Stellar, created a website to exchange online fantasy game cards. He called it Mt. Gox. The project never went anywhere, but after getting interested in Bitcoin in 2010, he repurposed the domain and created one of the first crypto exchanges, allowing users to buy and sell Bitcoin online.

McCaleb soon sold the site, citing a lack of time to make it better. The new owner, a french developer by the name of Mark Karpelès, saw the potential and quickly turned it into the largest Bitcoin exchange in the world. At one point, a whopping 70% of all Bitcoins changed hands through Mt. Gox.

And that's where the troubles started. One security breach after the next eventually forced Mt. Gox out of business in 2014, and the system was so vulnerable, that the company lost 850,000 (!) Bitcoins in total. Many users never got their money back, and Karpelès was found guilty on several charges in Japan, where Mt. Gox operated.

So, what was the problem and could this happen again? For the most part, Mt. Gox held all funds in so-called hot wallets. Those wallets are connected to the internet and therefore more accessible by hackers. And while hackers are of course still a concern, nowadays many exchanges like Coinbase are holding over 90% of all funds in cold wallets to minimize your risk. But it is still a good reminder: always consider who you trust with the keys to your holdings!

And next time – how investors lost $4 billion on a coin that didn't even exist.

Disclaimer: This podcast references our opinion and is for information purposes only. It is not intended to be investment advice. Do your own research and seek a duly licensed professional for investment advice.