Massive Theft In Crypto Preventing Mass Adoption

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Blockchain the next frontier in Fintech

Blockchain technology has opened a new frontier in finance. For the first time in modern history, we are given a technology that gave us an option for an alternative monetary system that is more egalitarian, inclusive and beyond the control and frailties of centralized structures. This new technology made it possible for peer-to-peer transactions to occur without having to depend on any intermediary or centralized authority to ensure that the transactions will push through and are irreversible. The potential of this technology was demonstrated with the creation of bitcoin which has been disrupting financial structures worldwide.

Massive theft in the crypto industry

In an article published in Bloomberg, the accounting firm pointed out that at least there have been around $9.8 billion in cryptocurrencies stolen by hackers since 2017. They blame lax security or poorly written code as the primary culprit why such a huge number of these cryptocurrencies have been stolen. Furthermore, investors especially institutional ones will not risk owning crypto assets if they cannot be safeguarded effectively in a similar fashion as cash, stocks, and bonds. Custody is such a big factor in the space that it believes that custodians have a tremendous opportunity to profit.

Centralized Exchanges are Preferred Targets

The accounting firm, however, failed to stress that a big portion of the $9.8 billion in cryptocurrencies stolen by hackers came from Centralized Exchanges (CEX). The huge amounts of cryptocurrencies stored in just a few cryptos wallets have become attractive honeypots just waiting to be exploited. To make things worst any client funds that are stored in these types of wallets are always at risk of being locked away by the operator of the exchange for whatever reason they declare.

Non-custodial Trading

Fortunately, we have decentralized exchanges (DEX) that enable users to trade directly from their non-custodial wallets. This is by far the safest way to trade as digital assets never leave the wallets of the owners, not until the moment, the users themselves trigger a transaction by which the smart contract takes over to execute the trade. When conditions are met the transaction will execute and no one will be able to stop it since it is governed by the blockchain. Even operators of the DEX will not be able to stop the transaction.

A solution to curb out theft in the crypto industry

The centralized exchanges have been the target of many major hacks in the industry. To significantly lower the number of theft it is of utmost importance to secure them. However, it has been proven to be difficult and expensive with many of the centralized exchanges unable to implement the most effective ways to secure their platform. Perhaps the best way to mitigate this problem is to drop centralized trading altogether and support for the growth and development of Decentralized Exchanges.

Blockchain/crypto enthusiast from the Philippines.