Solana Breach Latest Example of Dangers of Investing in Wild West of Cryptocurrency Hot Wallets

Much Like the Gold Miners of the 19th-Century, Cryptocurrency Investors Are Entering Unexplored Territory Fraught With Danger and Scarce on Safety Nets

The vast majority of prospectors were unsuccessful and went home empty-handed. With the latest crypto controversy involving the recent Solana breach, SOL investors could be facing a similar fate as those empty-handed 19th-century gold miners.

Whether they simply couldn’t find any gold, spent too much to mine what little they found or had their gold taken from them by thieves, they left the pursuit with less than they entered.

Much of the same can be said for cryptocurrency investors, especially if they invest using online exchanges using “hot wallets” or crypto storage accounts that are always linked to the internet. As opposed to “cold wallets” or storage devices not linked to the internet, hot wallets are riskier for two significant reasons.

First, the investor is not in control of the wallet. The exchange is actually in control of the wallet and can cut off investor access if they choose to. Many crypto investors learned this the hard way recently when several major crypto exchanges imploded, locking out investors as their currencies cratered in value.

Second, hot wallets are always connected to the internet, which is always accessible, not necessarily by the owner. Nefarious actors seem to inevitably find a way through the security put in place by the crypto companies. When they do, they can drain accounts and send the crypto wherever they choose. The anonymity baked into crypto makes catching those responsible or recovering the assets unlikely.

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Users of the Solana (SOL) crypto platform learned this lesson the hard way in early August when a hacker bypassed the platform’s defenses and managed to drain more than $5.2 million in cryptocurrencies from nearly 8,000 separate wallets. Even those wallets not affected by the hack suffered, as Solana’s sol token lost almost 8% in the hours following the announcement of the intrusion.

While Solana and other platforms offer users a more convenient way to invest in crypto, that convenience carries a price. Hot wallets are inherently more risky than cold wallets and should be treated as such. Only those with an increased risk tolerance should be using hot wallets. Others should take the extra time to set up a cold wallet.

Solana is currently trading at $35.34, up +1.79% on the day. YTD SOL is down -79.37%.

Learn more about Solana: Website | Whitepaper | SOL Chart

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