After FTX Collapse and Fraud, What Should Crypto Fix Next?

Significant collapses within the crypto sector such as FTX have caused a sense of uncertainty regarding crypto’s adoption rate. Despite fraud revelations, cybersecurity is still an important issue that the crypto industry needs to address.

The cryptocurrency sector today is bleeding profusely and has been doing so since the start of 2022. The market capitalization dropped significantly this year, sliding below the trillion-dollar mark. Thanks to the different catalysts that helped onboard a harsh crypto winter. The latest trigger was the collapse of one of the largest exchanges in crypto, FTX, an outlier even for the crypto industry. 

Much has been said and covered about the fall of the exchange and its founder, Sam Bankman-Fried, or ‘SBF.’ The disgraced founder was charged with eight counts of fraud and sued by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). 

BeInCrypto has covered SBF’s crumbling empire in reports and shed light on his fraudulent activities. But what’s next? What should crypto fix next before the year comes to an end?

This article will focus on cybersecurity, which is one of the critical areas in the cryptocurrency industry. Cybersecurity is an important issue that needs to be addressed, even though it has been overshadowed by the collapse of FTX and allegations of fraud.

Does Blockchain need security? 

Descriptions of blockchain technology factor out cryptography, immutability, and decentralization. With this cryptographic protection and the warranty that nobody can regulate information without the know-how of other participants, blockchain appears to provide a tamper-proof account of transactions.

However, this does not imply that blockchain isn’t susceptible to cyber-assaults and security fraud, those are likely to continue the highly unregulated crypto industry. People with malicious causes should exploit blockchain security vulnerabilities to their advantage. There have been many examples of blockchain attacks that have made the news. Some of the most severe attacks that have revealed the security risks of blockchain can be summarized by examining these recent incidents.

Past Instances

Exploited Code: showcased privateness and safety problems of the Decentralized Autonomous Organization (or DAO) blockchain in which programmers had been solving a hassle concerning code malfunctioning. But, at this time, an unknown attacker began draining the DAO of Ether amassed from its tokens’ sale. DAO lost more than $60 million of Ether (ETH), which accounted for nearly one-third of its total value. The loss was a significant blow to DAO. Right here, code exploitation served as the primary wrongdoer for this event and rightfully showed the vulnerability of the blockchain infrastructure.

Missing Keys: There were cases wherein Bitcoins had been stolen; a distinguished one took place from a Hong Kong-based cryptocurrency trade, Bitfinex. The quantity stolen changed to close to $72 million, proving that stolen private keys or personal virtual signatures were the possible motives for the occasion.

Any other classic exploitation kind would be hacking employee systems, as became the case for Bithumb. Herein hackers have been capable of digging into the information of around 30,000 customers alongside stealing Bitcoin worth $32 million.

Based totally on these kinds of factors, that blockchain isn’t so secure. Therefore, it’s vital to recognize every detail that influences blockchain safety. In fact, as per a Dec. 8 report, hackers are launching 15 crypto scams per hour every day. 

Discussing the Problem and Solution for Crypto Cybersecurity

To better understand what solutions are possible given events like the FTX collapse, BeInCrypto reached out to cybersecurity expert Christian Seifert, researcher-in-residence at the Forta Network, to discuss why cybersecurity is the next problem that the industry needs to focus on for widespread adoption. Over email, the cyber expert shared a few insights regarding this matter.

Herein, Forta Network is a real-time detection network for security and operational monitoring of the blockchain.

First discussing some of the pressing issues threatening the crypto industry, Seifert stated: 

“End-user protections are virtually non-existent. With the FTX debacle, users are pulling funds off exchanges and opting for self-custody. Attackers are going after user funds in phishing attacks and scams. A majority of wallet providers do not offer a security layer for end users. Protocols don’t follow good security practices. This spans from audits all the way to monitoring and cyber insurance.”

Thereby, highlighting the need for protocols to adopt good security practices. In terms of standards for security for every project, ‘protocols should adopt audits, utilization of smart contract libraries (like OZ’s library), bug bounties, real-time monitoring and incident response, and cyber insurance,’ he added.

In a concluding narrative, the expert shared some steps one should keep in mind when investing in crypto. He asserted: 

“Use a wallet that incorporates security features like key management and phish protections. Ensure to also protect your endpoint and email with traditional security products. Use 2FA for all accounts. Split assets across multiple wallets. Utilization of hardware wallets/multi-sigs.” 

Potential for Crypto Cybersecurity

Indeed, making crypto, a niche yet emerging asset class, can bolster crypto’s adoption. Even the on-and-off relationship with regulators can take a turn for good as the environment adopted cautionary measures to offset illicit activities. 

‘Cybersecurity will become digital healthcare, especially in the crypto world. What used to be a recommended activity has now become a must-have action,’ Dyma Budorin, the CEO at Hacken, a Web 3.0 cybersecurity company told BeInCrypto. 

Even the market for cybersecurity remains undervalued at the time of the press. The widespread adoption of the blockchain market remains directly proportional to the cybersecurity market, especially after the FTX collapse. Shedding some light on the former’s potential, here’s a graph that sheds some light on this narrative. 

Likewise capitalizing on the essential need, in this case, cybersecurity can bolster the adoption rate. ‘The cybersecurity industry will experience unprecedented growth. It will become a basic need for projects and users, like healthcare services and medicines for people in their daily life,’ Dyma Budorin added. 

By compiling the datasets, the cybersecurity market can prosper with the growth of the blockchain market. In this case, the former can grow. 

Now given the potential to skyrocket for both sectors, especially crypto cybersecurity, can the amalgamation actually stand true to the mentioned statistics? 

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