In light of the FBI managing to seize Bitcoin that had been sent to criminals who hacked the Colonial Pipeline, some critics have boldly proclaimed this is proof that the world’s biggest cryptocurrency can be hacked.
However, as you can imagine, the reality is far more nuanced than this.
First up, it’s worth remembering that although Bitcoin transactions are anonymous, they can still be traced. A number of blockchain intelligence firms have popped up to do exactly this — and some of them work with law enforcement agencies.
Secondly, we don’t know exactly how the FBI managed to retrieve the $2.3 million. As you might expect, they’re rather reluctant to share their methods in case cybercriminals manage to find a workaround in future.
So… What Happened?
In all likelihood, the feds were able to get their hands on the private key that unlocked access to this Bitcoin because it was stored on a centralized server. “A case of bad IT hygiene for a criminal organization,” as CNBC puts it.
Castle Island Ventures founding partner Nic Carter told the news outlet that it is “far-fetched” to suggest that law enforcement have managed to crack the algorithm that ensures Bitcoin can only be spent by the person who owns a private key.
This would suggest that DarkSide, the gang behind the attack that targeted a key piece of American infrastructure, relied on hot storage for the Bitcoin — a wallet that is connected to the internet — rather than cold storage, the equivalent of having a bundle of $100 notes stashed under your mattress.
BTC appears to have been mounting something of a recovery today after sliding as low as $31,114.44 on Tuesday. At the time of writing, it had managed to hit highs of $34,492.55 — up more than 4% in 24 hours.