Over $600 million in crypto was stolen by a hacker. Experts explain why cyberattacks should not discourage the adoption of digital assets. The recent $600 million digital currency hack is a clear sign that cyberattacks are an issue. It should not, however, discourage the adoption of digital assets. The theft occurred because the funds were stored on exchanges and was controlled by private keys instead of offline wallets or hardware devices where it would be safer for investors to store their crypto coins.
Analysts say the precipitous drop is due to uncertainty among investors and an increase regulatory pressure on digital currency exchanges that have led to some high profile exchange hacks. But there are many who believe these factors should not dissuade one from investing or even embracing cryptos as they may be our best bet at fighting back against financial institutions, multinationals monopolizing markets, and traditional banks with unfair fees.The experts explain how Axie Infinity’s Ronin Network was hacked last month and over $600 million worth of tokens were stolen.
Rather than faulting the blockchain technology, they blamed human error and social engineering. “If consumers aren’t protected from things like this, the industry will collapse.”
The massive Ronin network crypto heist should not deter widespread crypto adoption, according to experts, who blamed a lack of cybersecurity rather than a problem with blockchain technology.
In a blog post on Tuesday, Ronin said that a hacker stole roughly $625 million worth of cryptocurrency by draining 173,600 Ethereum. Axie Infinity is a popular play-to-earn game with $4 billion in NFT sales.
Despite being detected almost a week after it occurred, the heist is believed to be one of the biggest in crypto history and highlights the industry’s immense risk.
As Ari Redbord, head of legal and government affairs at blockchain research firm TRM, told Insider, “A hack used to mean the loss of passwords and usernames, but now it is the loss of life savings.” He called it “bank robbery at the speed of the internet.”
Sky Mavis and Axie DAO Hacked: What’s Next For The Crypto Industry?
Axie Infinity’s developer, Sky Mavis, implemented a secondary blockchain for faster, cheaper transactions since ethereum transactions are expensive.
Validator nodes, or proof-of-stake tools that confirm transactions, occupied nine nodes in the side chain. At least five were controlled by Sky Mavis, and four by Axie Decentralized Autonomous Organization.Sky Mavis said it did not renew its agreement with the DAO in December, but hackers managed to take over four of Sky Mavis’ validator nodes, as well as one from Axie DAO, which enabled access to the crypto and eventually the theft. Sky Mavis said it has since replaced all validator nodes.
Max Galka, CEO of crypto forensics firm Elementus, said the lapsed DAO deal demonstrates the danger of storing cryptocurrencies on side chains rather than native blockchains.
“What was supposed to be a temporary measure wasn’t removed. It was an outright error,” he told Insider.
Keeping Crypto Safe
According to Ronin Network, all evidence suggests the attack was socially engineered, which means people were targeted via emails or phishing and tricked into giving hackers access.
Insider spoke with Amber Ghaddar, founder of decentralized finance firm AllianceBlock, who said human error is a major cause of cybercrime.
“Industry will fail if consumers are not protected from things like this,” she said.
“Hackers will keep using social engineering until it loses its effectiveness, but this isn’t a reason to be skeptical of cryptocurrency,” Redbord said.
Despite its reputation as an extremely secure mechanism that offers traceable transactions, transparency, and decentralization, all three experts agreed that the blockchain is not to blame.
Rather than focusing on cryptocurrencies, the government should focus on hardening cyberdefenses, not crypto regulation, Redbord said.
In addition to funding for additional intelligence tools, more robust and pervasive cyber-security networks are among the solutions, Ghaddar said. Education outreach can bolster the existing defense systems, he said.
Redbord said such attacks are concerning, but he believes in crypto’s promise. “We should focus on building out trust layers in the crypto economy – anti-money laundering infrastructure, compliance controls, cybersecurity – so that people will interact with it.”
Author
Chris Munch is a professional cryptocurrency and blockchain writer with a background in software businesses, and has been involved in marketing within the cryptocurrency space. With a passion for innovation, Chris brings a unique and insightful perspective to the world of crypto and blockchain. Chris has a deep understanding of the economic, psychological, marketing and financial forces that drive the crypto market, and has made a number of accurate calls of major shifts in market trends. He is constantly researching and studying the latest trends and technologies, ensuring that he is always up-to-date on the latest developments in the industry. Chris’ writing is characterized by his ability to explain complex concepts in a clear and concise manner, making it accessible to a wide audience of readers.
