In 2020, the crypto industry was no stranger to cyber attacks and cybersecurity breaches. Hackers ran away with millions after hitting them KuCoin Exchange in September, while a number of DeFi (decentralized finance) platforms – Balancer, Opyn, acropolisand others – received more than their fair share of drama year-round.
A number of cybersecurity experts and personalities from the crypto industry speak for the next year Cryptonews.com predict a healthy (or unhealthy) number of cyber attacks will also take place in 2021. While the growth in institutional investment may cause exchanges to further improve their security standards and measures, attacks on DeFi platforms, smart contracts, and individual users are likely to increase.
2020: What experts said
At the end of 2019, experts forecast that a steady number of attacks on the stock exchanges will continue in 2020, without necessarily increasing.
This has been largely confirmed by reality as not only does KuCoin suffer a pretty high profile breach, but also dinner, Eterbase, 2gether, and Old bitwhich was forced to shut down due to its hack in February. Most of these exchanges may be quite small, but they show that hackers are still targeting exchanges, even though the largest platforms may have learned to better protect themselves.
Experts also forecast a noticeable increase in attacks of 51%. It would be a stretch to say that this forecast was for the most part accurate, despite Ethereum Classic (ETC), Bitcoin Gold (BTG), and Grin (GRINK) That year 51% of the attacks were recorded. There was no significant increase in exploits compared to previous years.
2021: A new goal is created – DeFi
The first forecast for 2021 is that attacks on exchanges will either remain stable or decrease (at least on established exchanges), while attacks on DeFi platforms and protocols – especially new ones – will increase. This is the view of John Jeffries, Chief Financial Analyst at Crypto / Blockchain Security Intelligence Company CipherTrace.
Reportedly, losses from cryptocurrency theft, hacking and fraud declined to $ 1.8 billion in the first 10 months of the year year over year Crime in the DeFi sector increased. So far, DeFi hacks in 2020 account for 21% of the hacking and theft volume in 2020. In the second half of 2020, DeFi took over 50% of all thefts and hacks ($ 47.7 million or 14% of the volume hacked).
“The DeFi hype is reminiscent of the 2017 ICO craze in the sense that many DeFi protocol developers start too quickly and fail to perform the necessary smart security reviews on contracts,” he said Cryptonews.com.
Jeffries said DeFi’s problems will largely worsen in the short to medium term, as decentralized funding is touted as a major innovation, unlike the brief ICO boom, and is expected to increase significantly in the years to come.
“DeFi has the growing problem of expanding too quickly and there are simply not enough skilled writers and smart contract reviewers that create quality assurance issues,” he added.
Linked to the increase in attacks on DeFi platforms, there is a likely increase in the targeting of smart contracts that DeFi platforms generally use.
“As smart contracts become more popular, there is a very good chance that hacks will persist and with more contracts there will be more hacks,” said Mathieu Hardy, chief product officer at the trading platform Osom.finance. “Developing smart contracts is more like developing hardware than software, and it will take the software industry a while to get used to a new way of working.”
Pavol ‘Stick’ Rusnák, co-founder and chief technology officer of Satoshi Labs, the manufacturer of the For sure Hardware Wallet also said that it is inevitable that hacks on smart contracts and new DeFi platforms will increase in 2021, especially if new startups want to take advantage of the DeFi boom.
“It’s impossible to write a secure smart contract or remote exchange when your team only has a handful of people. And yet we see more and more people putting their money into systems that have not received peer reviews and security audits, ”he said.
Conversely, Mathieu Hardy added that attacks on stock exchanges are likely to gradually recede, especially as competition increases to attract the influx of new institutional and retail money.
“When it comes to exchanges, we expect market pressures (people will choose better exchanges) as well as better regulations (we see a lot more pressure worldwide to regulate exchanges more like traditional payment institutions) will change the landscape sooner rather than later. We are self-regulated and have adopted most of the useful rules for payment institutions in terms of security, ”he said.
The main point of failure – users
The cryptoasset market is on the rise, which will allow exchanges and other platforms to invest more in security in 2021. At the same time, the rise in Cryptoasset prices will give (potential) hackers greater motivation to attempt hacks, scams and fraud thefts.
“Crypto price hikes this year will clearly attract more bad actors to target cryptocurrencies, holders and exchanges, but institutionalization and regulation are rapidly improving crypto cybersecurity,” said John Jefferies.
The result of these parallel developments – improved security and greater incentive to steal – will be that individual users and owners will increasingly become the target of cyber criminals.
“The greatest security challenge, as in most mature industries, is to develop systems that are secure enough that users cannot harm themselves. Because like financial hacking today, most of it is done through social engineering and made you install crappy software, ”said Mathieu Hardy.
That assessment is shared by Jefferies, who also suggested that users “will continue to be the biggest security challenge,” largely due to phishing scams that will also attempt to target platform administrators.
Jefferies also warned of the continued prevalence of investment fraud, fueled by the continued growth of the DeFi sector.
“Investment fraud is still the most widespread crypto crime, with bad actors exploiting users’ FOMO [fear of missing out] and the desire to get rich quick in order to entice them into participating in fraudulent investment platforms, ”he said.
Complicating this whole picture is the regulatory uncertainties surrounding DeFi, which can ultimately add to the hacks due to the decrease in accountability.
“DeFi poses a regulatory challenge as many questions remain unanswered as to whether DeFi protocols are treated the same as CeFi (Centralized Finance) platforms and who should be held accountable for lack of compliance, negligence, hack or a protocol used to laundering stolen funds, ”said John Jefferies.
Even with the risks that 2021 will bring, it is likely that at least part of the crypto community will become more aware of the security issues and will literally take matters into their own hands by not storing significant amounts of the crypto wealth when exchanging and moving to a hardware wallet.
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