Saying that times are tough in our industry is hardly an exaggeration. For some time now, the prices of staples like Bitcoin and Ether have been falling, signaling a “crypto winter.” Likewise, since reaching a multibillion-dollar high in January of this year, monthly non-fungible token (NFT) trading volumes have decreased by more than 90%. Of course, the numerous black swan incidents shaking the cryptocurrency world, like the FTX and Three Arrows Capital meltdowns, have only served to exacerbate these declines. In light of everything, it shouldn’t come as a surprise that there is a lack of trust in the cryptosphere.
While it is important to address the destructive behaviors of careless CEOs and hold those responsible for these incidents accountable, if our industry is to recover, we cannot stop there. Improved end-user security against the risk of scams and hacks must be a top priority in order to address the trust deficit that cryptocurrency faces.
Do not believe so? Digital assets worth $3.2 billion were stolen in 2021, claims research firm Chainalysis. With $718 million in total hacking-related losses already reported in October alone, things don’t seem to be getting any better for our industry this year. Report after report reveals that well-known crypto scams, like rug pulls and wallet drainers, are on the rise, which paints a bleak picture when it comes to scams. A startling $100 million in investor funds was lost through crude NFT scams between July 2021 and August 2022. And given that the majority of NFT scams are micro-scams affecting specific users who never get reported, this number is probably an underestimate.
End users are duped into emptying their wallets by phishing links. Front-running schemes using videos that promise “HUGE RETURNS” to entice victims to download fake software that grants fraudsters access to their assets. even direct assaults that damage bridges, such as Ronin and Nomad. Look around and you’ll see that scams and hacks are not only costing the crypto industry billions of dollars in digital assets, but they are also seriously eroding trust in crypto, more so than even the black swan events of 2022.
Yes, we can avoid and banish CEOs like Sam Bankman-Fried, Do Kwon, and all the other bad actors. But if we want to persuade the general public and clients that cryptocurrency is secure for communication and investment, we must address the issue of scams and head-on hacks.
How can we ensure that Web3 is secure for everyone? Decentralization, transparency, and immutability are the guiding principles of cryptocurrencies. Everybody should be able to start using cryptocurrency, whether that means buying or trading NFTs or buying and selling Bitcoin, so we as an industry must reduce the amount of work and risk that users must undertake to do so. Currently, cryptography is too complicated and challenging for the average person to comprehend. Scams and hacks can happen and spread far too easily in the absence of better tools and anti-scam software.
Undoubtedly, one way our industry can fight scams and hacks is by creating anti-scam tools. It will be beneficial to invest more money in security measures and programs that reimburse users for losses caused by hacks or scams. However, significant mainstream adoption of cryptocurrencies will never happen if the cost and hassle of security for end users remains higher in crypto than it is in traditional finance. The biggest obstacle to our industry’s recovery and attracting the next 100 million users maybe this.
Recognizing a problem is the first step in solving it. Scams and hacks are just as responsible for our industry’s trust deficit as the FTX and Three Arrows scandals. Crypto is frequently described as a “dark forest” in slang, where parties to transactions who are identified as exploitable usually end up being taken advantage of (or destroyed). Both users and I personally don’t want to live in a pitch-black forest. It’s up to us to pave a well-lit path forward. End-user security can no longer just be a catchphrase in our business; it must be a cornerstone of our turnaround.
This article is intended for general informational purposes only and should not be construed as investment or legal advice. The author’s views, ideas, and opinions are his or her own and do not necessarily reflect or stand for those of BitNewsToday.