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Crypto Boom: Bull Run or Bullseye for Hackers?

Last Updated May 30, 2024 9:50 AM
Last Updated May 30, 2024 9:50 AM
By Sunil Srivatsa
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Key Takeaways
  • Proactive measures can help protect crypto platforms and their users from the devastating consequences of security breaches.
  • Although audits play a crucial role in identifying and addressing critical risks, they do not guarantee bug-free code.
  • A vigilant approach, including bug bounty programs, is essential to address both major and minor security gaps.

The crypto market is expanding rapidly, earning credibility and trust, which is leading to increased adoption and surging volume. Currently, the combined market capitalization of crypto assets is more than $2.6 trillion.

However, as with any market experiencing substantial growth, there is always the potential for fraudulent actors to attempt to make quick gains unlawfully, and the crypto market is no exception. In 2022, dubbed  “the most significant year in hacks and exploits for the crypto industry,” more than $3 billion was stolen. Of this, $718 million was taken from DeFi protocols across 11 different hacks.

Such breaches can negatively affect investors’ willingness to deploy funds in these protocols and the crypto space as a whole. Although investors are aware of such breaches and hacks, they often make mistakes, especially during a bull run.

Bull runs are often deceptive: a false confidence booster

The ongoing crypto bull run, with Bitcoin (BTC) trading between $60,000 and $70,000, shows great resilience along with Solana, Cardano, Polkadot, and Avalanche. This surge has greatly intrigued investors.

Coupled with the approval of Bitcoin ETFs for public trade in the United States and Hong Kong, enthusiasm is soaring. This period of excitement calls for heightened standards of cautiousness and wise and careful decision-making.

A recent surge in the market has raised concerns about potential risks. While factors like ETF and ETN approvals have bolstered Bitcoin’s legitimacy and price stability, experts warn of possible pitfalls. Regulatory changes, technological advancements, and broader economic shifts could all pose challenges.

Though historical trends and halving cycles offer some insights, the complex interplay of these factors makes precise predictions about Bitcoin’s future price difficult.

Navigating the wilderness of a bull market requires the right long-term vision, prudent diversification strategies, the tenacity to stick to fundamentals, and access to well-researched advice and thoughtful discussions.

Under no conditions—driven by the urge to make supernormal gains—should investors encourage protocols that launch without adequate security audits. Professional smart contract auditing firms are equipped with the right tools and mechanisms to identify critical vulnerabilities before a platform or an update appears on the market.

Investors need to seek out these reports and carefully study what they have to say about the protocol. If such a report is not readily available, it is never wise to invest in such protocols. Industry players should never support such behavior.

Some foundations, many with designated committees for decentralized finance, encourage DeFi protocols with tokens and airdrops. Often, this encouragement is meant to incentivize DeFi protocols to build on these foundations’ networks. These foundations should prioritize rewarding platforms that conduct regular audits and make security their foremost agenda.

What projects and developers can do to prevent thefts

Whenever a Web3 auditor or security certification platform inspects a protocol, they look into many aspects. It assesses code and test quality, audits the smart contract design and architecture, and reviews integrations with other protocols, among other factors.

Developers can contribute to these audits by keeping their codebases small and manageable, making them easier to audit and secure.

One has to remember that audits—despite being a powerful tool to ensure efficiency—require resources. For instance, formal verification is a highly recommended method to evaluate the correctness of a smart contract.

It is more exhaustive than procedures like unit or integration testing. It leverages mathematical methods to prove a smart contract’s correctness and effectively verifies that the contract satisfies specific properties.

However, a comprehensive and exhaustive process will obviously demand considerable resources. The quality of the specification also plays a role in determining its effectiveness. If developers keep their codes compact and precise, it will be easier on the auditors and create a win-win scenario for both parties.

Apart from sincere efforts made by developers and promoters of a project, there is also scope for protocols and applications to serve the market in preventing thefts.

Security is an evolving process

Like Rome was not built in a day, bug-free security can not be guaranteed as a security audit outcome. Usually, when an auditor examines a DeFi platform’s health, it runs multiple assessment methods, including formal verification, manual review, static analysis, etc. It also examines the ecosystem and codebase, among other things. However, this health check does not essentially result in bug-free code.

The audit identifies critical risks that impact a platform’s safe functioning. It attempts to identify centralization issues and logical errors. Platform developers can now pay heed to these identifications and recommendations. They must ensure that these issues are alleviated, minimized, and mitigated.

Moreover, a one-time action on these recommendations is not enough. Vigilance and alertness should persist throughout the solution’s operational lifespan. It’s also important for projects to run a bug bounty program like Immunefi.

It must cover every aspect, from design and architecture to monitoring and alerting after the contracts have been deployed.

Security gaps  can be of different types, some of which can be critical. Ignoring these gaps poses severe risks, including the loss of funds and control of the project. Simultaneously, there may be smaller, less intense risks that might not appear harmful on the surface initially but can affect the platform’s overall functioning in the long run.

Some security gaps or vulnerabilities might never compromise integrity but could reduce efficiency. Therefore, it is always in the platform’s interest to address these issues and prioritize safeguarding users’ funds.

Staying at par with industry benchmarks and ensuring the presence of an optimized code structure always pays off.

Disclaimer: The views, thoughts, and opinions expressed in the article belong solely to the author, and not necessarily to CCN, its management, employees, or affiliates. This content is for informational purposes only and should not be considered professional advice.