As crypto has gained popularity, there have been numerous high-profile security scandals where customers have lost huge sums of money. These infamous instances painted a picture of a fundamentally unsafe industry, with more and more hacking attacks feeding into this snowballing narrative.
Regardless of whether this perception was ever valid, it is now changing for the better – as serial entrepreneur Roman Semiokhin can attest. Crypto is increasingly emerging as one of the more secure asset classes, partly due to recent improvements to security. In 2023 there was strong evidence of this progress, with losses from hacking down more than 50% from 2022, when $3.8 billion was stolen from cryptocurrency businesses.
With the collapse of FTX, 2022 was a bad year for crypto generally, but there has been a marked improvement in both regulation and security measures taken by crypto companies since. The downturn in hacking incidents is partly driven by the efforts of law enforcement agencies against cybercrimes in the digital currency sphere. However, it is also due to the new, more collaborative approach taken by various actors within the industry, including blockchain and wallet providers and cryptocurrency exchanges.
This collaboration has been vital to counter the continuously evolving and menacing threat from hackers. By sharing examples of threats and breaches of security, companies have been able to learn about potential vulnerabilities from rivals, which brings multifaceted benefits.
The scale of the threat necessitates an industry-wide approach to the security of crypto assets. Among the DeFi targets that nefarious actors predominantly tried to access are exchanges but also newer decentralised applications like bridges and lending protocols. Therefore, increased collaboration with developers of DeFi protocols will prove vital in limiting hacking to this more vulnerable part of the industry.
By collaborating with rivals on protective measures, crypto exchanges and platforms can improve their own security while also making the industry safer. This is critical; a potential investor worried that the bitcoin they are going to purchase might be vulnerable to third-party access is far more likely to go elsewhere. In other words, a security breach is not just damaging for the exchange in question: it damages the industry as a whole by deterring investment. As a new industry with no shortage of reputational issues after the FTX saga, it is essential that there is no perception that crypto is unsafe.
However, it is debatable whether this would have ever been a reasonable characterisation. In truth, crypto was never as unsafe as it was purported to be. It only took a few high-profile incidents to create a misleading and exaggerated view of the industry. These incidents fed into the general narrative that crypto is an ill-thought-out form of finance and an ill-advised investment choice.
Compared to other asset classes, crypto actually has advantages when it comes to security. At the cutting edge of technology and with capital to spend, the industry has the potential to become a leader in the field in the years to come.
Whilst there have been notorious incidents in the crypto world – such as the attack on Ronin Network, which resulted in $615 million being stolen – other asset classes are by no means immune. There has been an epidemic of fraud in the financial services industry, which was accelerated by the pandemic and peoples’ financial habits moving online.
There will certainly be challenges to come when it comes to cryptocurrency, with certain rogue state actors continuing to pose a key threat. As an investment, crypto is far from guaranteed to deliver secure and reliable profits for the consumer. However, the industry must demonstrate that it is as secure an asset class as they come – and whether your bitcoin investment goes up or down, it will always be safe.
For more information about this topic, visit Roman Semiokhin’s website: https://romansemiokhin.com