Shalini Nagarajan

Crypto exchange Upbit has started using more cold wallets after dealing with more hacking attempts since 2020.



Hackers reportedly attempted to breach crypto exchange Upbit about 160,000 times in the first half of 2023 alone.



This data, which reveals more than double the number of infringement attempts in the first half of 2021, was shared by Dunamu — the operator of Upbit — with South Korean lawmaker Rep. Park Seong-jung, a member of the National Assembly&#8217;s Information and Communications Technology (ICT) committee, Yonhap News <a href="https://www.yna.co.kr/view/AKR20231007053200002?section=search">reported</a> on Monday.



Dunamu reported a substantial rise in hacking attempts on the exchange, surging from about 8,400 in the second half of 2020 to 159,061 in the first half this year. 



Upbit — among the top 20 crypto exchanges by spot trading volume — is believed to have incurred losses of 58 billion won (equivalent to $42.8 million) due to a hacking incident in 2019.&nbsp;



Following this event, Upbit implemented preventive measures, such as distributing its operating hot wallets, effectively averting any subsequent cyber breaches, according to Yonhap.



In an effort to enhance security further, Dunamu announced its intent to increase Upbit’s cold wallet proportion to over 70% and adopt new procedures for operating hot wallets, designed to make them safer.



Hot wallets are generally considered more vulnerable to hacking and online threats because they are connected to the internet, whereas cold wallets are shield private keys from the risks associated with the online environment.



Rep. Park noted that the increasing frequency of hacking incidents targeting virtual asset exchanges, both domestically and internationally, is a growing concern.



He added that he feels the Ministry of Science and ICT has a vague role in overseeing these exchanges, and emphasized the importance of the Ministry taking proactive steps to address the issue.&nbsp;



Specifically, he called for the Ministry to carry out simulated security tests and assess the information security landscape to better prepare for cyberattacks, particularly in the context of frequent hacking attempts on virtual exchanges.



The cryptocurrency industry is still relatively young and lacks comprehensive regulation in many jurisdictions. This lack of oversight can attract bad actors who believe they can operate with relative impunity.



Immunefi recently <a href="https://assets.ctfassets.net/t3wqy70tc3bv/281FPX3g6liwuWgm1AGYiR/e05f679fc8890c7fdf34f43a5528c86b/Immunefi_Crypto_Losses_in_Q3_2023_Report.pdf">reported</a> that the crypto industry lost $1.4 billion to hacks and fraud so far this year, with $685.5 million lost in the third quarter alone.



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Upbit updates cold wallet policy in bid to thwart hackers

Sebastian Sinclair

South Korea&#8217;s largest crypto exchange, Upbit, has resumed deposits and withdrawals of Aptos (APT) tokens after abruptly halting the service due to a security incident.&nbsp;



Upbit said in a statement on Saturday it had detected an &#8220;abnormal deposit attempt&#8221; while monitoring <a href="https://blockworks.co/tag/aptos">Aptos</a> transactions, according to a rough translation from Google.



Following an inspection of its wallet system, the exchange confirmed stability for Aptos deposits and withdrawals has been restored and actions have been taken against the abnormal activity.



The incident gained public attention when <a href="https://x.com/definalist/status/1705916604473901076?s=20">various Upbit users</a> reported unauthorized deposits of what appeared to be Aptos tokens (<a href="https://blockworks.co/price/apt">APT</a>) in their accounts, according to X user Definalist. Blockworks has reached out to Upbit to confirm.



It was later discovered that these were not genuine Aptos tokens but “scam” tokens named ClaimAPTGift. Upbit customer service reportedly contacted users who had sold these fraudulent tokens, asking for refunds.



The problem, Definalist said, lay in Upbit&#8217;s wallet system failing to verify the types of tokens being deposited properly.&nbsp;



Normally, the system should differentiate between native Aptos tokens and other tokens within the same ecosystem. But due to a glitch, all tokens sent via a specific function were recognized as Aptos tokens, leading to the issue.



On a decentralized exchange, users can check the token address on-chain using a block explorer, <a href="https://blockworks.co/tag/etherscan">such as Etherscan on Ethereum</a>, to confirm whether a given token is authentic. A centralized platform, however, requires customers to trust the exchange’s internal naming system.



<h2 class="wp-block-heading">Crisis averted</h2>



A lucky break mitigated the severity of the incident. The scam tokens had six decimal places, while native Aptos tokens have eight.&nbsp;



If both had eight decimals, users could have received and potentially sold $25,000 instead of $250, risking a severe market disruption, Definalist said.



Upbit&#8217;s official notice also cautioned users to pay &#8220;special attention to the price differences with other exchanges&#8221; as trading resumes, acknowledging that the price may fluctuate drastically due to the incident.&nbsp;



The price of APT surged around 9% following the incident, and remains up 6% as of Monday at 3:30 am ET $5.45, Blockworks’ data shows.&nbsp;



Upbit said any delays in reflecting deposits and withdrawals would depend on block processing status and that transactions would proceed sequentially as blocks are completed.



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Upbit briefly suspends Aptos withdrawals following security incident

South Korean cryptocurrency exchange Upbit last month beat both Coinbase and OKX in trading volumes for the first time.



In July, Upbit&#8217;s spot trading volume bucked the general market trend and soared over 42%, reaching nearly $30 billion, according to crypto data firm CCData.



Meanwhile, OKX and Coinbase didn&#8217;t have the best month, with their volumes dropping nearly 12% to $28.6 billion and over 5% to $29 billion, respectively, the <a href="https://assets-global.website-files.com/63e3774c88285e5c6cbf3b9d/64cb85217e6b66a1f0b40240_Exchange%20Review%20July%20.pdf" target="_blank" rel="noreferrer noopener">report</a> showed.



Upbit has now climbed to the second-largest exchange spot by trading volume. Binance is still the big player in crypto spot trading, with a massive $208 billion in volumes.



But Binance&#8217;s grip on the market is slipping. Its market share has fallen for the fifth month in a row, dropping to 40.4% in July, the lowest it&#8217;s been since August 2022, the report said.



Binance and Coinbase&#8217;s trading volumes have taken a hit as they are tangled up in legal battles with US regulators over allegedly offering unregistered securities.



South Korea has emerged to become one of the most visible markets in the crypto industry. This is a stark contrast to just a few years ago, when the South Korean government was quite skeptical about crypto, even contemplating a total ban.&nbsp;



Instead of pursuing a ban, they&#8217;ve recently shifted course and begun introducing regulations.



In June, <a href="https://blockworks.co/news/south-korea-insider-trading-law">the enactment of the Virtual Asset Protection Act</a> signaled a sophisticated legislative move, criminalizing market manipulation and targeting insider trading within the realm of digital assets.



This legislative advancement also empowers the Financial Services Commission to extend its oversight to encompass digital asset operators as well as asset custodians.



CCData separately identified a continued downward trend in trading volumes on centralized exchanges, which have languished at record lows in recent months.&nbsp;



In July, the combined volume for spot and derivatives trading fell by 12% to $2.36 trillion. This marks the second-lowest combined volume on centralized exchanges since December 2020, highlighting the persistent slowdown in this segment of the market.



“The decrease in trading volumes can be attributed to the lack of volatility in the price action of major crypto assets, with Bitcoin and Ethereum largely trading in a narrow range throughout July,” the report said.



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