The crypto market has witnessed countless hacks and exploits over the year. This has directly affected the mainstream adoption rate. Ergo, technological innovation is a must to protect customer assets and help exchanges and firms stay one step ahead of hackers.
Numerous security challenges, including thefts, hacks, and fraudulent activities, have accompanied the rise of cryptocurrencies and blockchain technology. These events have damaged the reputation of the industry and hindered mainstream adoption.
Exploring Different Vulnerabilities
Hackers participating in illicit activities related to crypto are on the rise. The spotlight is again on crypto exchanges’ vulnerabilities and the assets they trade. FTX’s $400 million hack last November was a critical factor in its downfall, from which the industry is still reeling. Hot wallets are especially vulnerable, and Bitcoin ATM makers have taken a massive reputational hit from recent exploits.
Overall, the crypto industry does face numerous security challenges. Some of the most significant security obstacles faced by the crypto industry are:
- Hacking: One of the crypto industry’s most significant security challenges is hacking. Cryptocurrencies are stored in digital wallets; if they are not adequately secured, they can be hacked, and the funds can be stolen.
- Phishing Scams: Another significant security challenge facing the crypto industry is phishing scams. Cybercriminals often use phishing emails and websites to trick people into giving them access to their cryptocurrency wallets.
- Insider Threats: Insider threats can also pose a significant security challenge to the crypto industry. Employees with access to sensitive information or cryptocurrency wallets may misuse their privileges or leak information to external parties.
- Malware: Malware such as viruses, trojans, and ransomware can also pose a significant threat to the security of the crypto industry. Malware can be used to steal private keys or other sensitive information from digital wallets.
- Regulatory Challenges: The crypto industry also faces regulatory challenges, particularly around issues such as money laundering, terrorist financing, and tax evasion. These challenges can impact the industry’s security by making it more difficult to implement adequate security measures.
The security challenges the crypto industry faces are complex and multifaceted. Thus, addressing them requires a comprehensive approach that includes technological solutions to begin the journey.
Looking Out for Answers to Boost Credibility
Several technological innovations can help protect customer assets and enable exchanges and firms to stay one step ahead of hackers. BeInCrypto reached out to various industry experts and identified those areas where the need for better security is most acute.
One of the most promising innovations is multi-party computation (MPC) technology. MPC allows multiple parties to jointly compute a function without sharing their private inputs. In the blockchain and crypto context, MPC protects private keys required to access a user’s funds. By splitting the key into multiple parts and distributing it among different parties, MPC can prevent a single point of failure and enhance security.
“If a user’s private key is lost or stolen, funds stored in the wallet may be stolen or remain inaccessible forever. MPC wallets attempt to solve the problems of traditional cryptocurrency wallets by redundantly distributing ownership of a private key between n parties.”
Another innovation that can protect customer assets is threshold signatures (TSS). Like MPC, threshold signatures split a private key into multiple parts and distribute it among different parties. However, in this case, the essential parts are used to create a signature rather than access funds.
By requiring a threshold number of signatures to execute a transaction, threshold signatures can prevent unauthorized access and enable secure transactions.
Other Key Areas to Consider
Moving on, another technology that can bolster security is homomorphic encryption. Homomorphic encryption enables computations to be performed on encrypted data without decrypting it. In the context of blockchain and crypto, homomorphic encryption can protect sensitive data, such as transaction details and user identities. By encrypting this data, homomorphic encryption can prevent unauthorized access and enable secure storage and transmission.
Ravital Solomon, the co-founder and CEO of Sunscreen, thinks fully homomorphic encryption (FHE) is even more promising in its potential to bolster blockchain privacy. Solomon explained that the technology allows individuals to perform computations on encrypted data without decrypting it.
Zero-knowledge proofs also enhance security in the crypto industry. Zero-knowledge proofs enable one party to prove to another party that they know a secret without revealing it. In blockchain and crypto, zero-knowledge proofs can be used to verify transactions without revealing the parties’ identities or the transaction’s details. This can enable secure and private transactions while preserving the transparency and immutability of the blockchain.
Finally, decentralized identity (DID) solutions hold importance in the crypto industry. DID solutions enable users to control their identities and personal data without relying on centralized authorities or intermediaries. By using decentralized identifiers and verifiable credentials, DID solutions can prevent identity theft, enhance privacy, and enable secure access to digital services.
Technological Advancement Is a Must
Technological innovations are critical in protecting customer assets and helping exchanges and firms stay one step ahead of hackers. The crypto industry faces numerous security challenges. Still, several technological innovations can safeguard customer assets and enable businesses and firms to stay one step ahead of hackers.
These innovations include multi-party computation, threshold signatures, homomorphic encryption, zero-knowledge proofs, and decentralized identity solutions. By adopting these technologies and investing in security, the crypto industry can enhance trust, promote mainstream adoption, and realize the full potential of blockchain and crypto.
Following the Trust Project guidelines, this feature article presents opinions and perspectives from industry experts or individuals. BeInCrypto is dedicated to transparent reporting, but the views expressed in this article do not necessarily reflect those of BeInCrypto or its staff. Readers should verify information independently and consult with a professional before making decisions based on this content.