How Traditional Web2 Flaws Are Undermining Crypto’s Security

Revealing how Web2’s legacy issues are compromising crypto

The state of cryptocurrency security in 2023 has been marked by a series of high-profile exploits and hacks, highlighting the ongoing battle between technological advancements and cybersecurity threats. A recent report from Immunefi, a blockchain security platform, revealed a startling fact: nearly half of all cryptocurrency lost from Web3 exploits in 2022 was due to traditional Web2 security issues, such as leaked private keys​​. This underscores a critical vulnerability in the crypto ecosystem, where old-world security flaws are being exploited in new-world financial systems.

In September 2023 alone, CertiK confirmed a loss of approximately $332 million due to various exploits, hacks, and scams, marking it as the most concerning month for crypto-related exploits. Notable incidents included the Mixin Network attack, leading to a $200 million loss, and a significant breach at CoinEx, resulting in over $53 million in losses. Another incident involved Stake.com, with a loss of $41 million​​. These figures are part of a worrying trend in 2023, where the total lost to exploits, scams, and hacks reached a staggering $1.34 billion by September​​.

A report from BeosinAlert further highlights the scale of the issue, showing that losses from hacks, phishing scams, and rug pulls in the Web3 sector reached $889.26 million in Q3 2023, surpassing the combined losses from the first two quarters of the year​​. The diversity and complexity of these attacks demonstrate the multifaceted nature of the threats facing the crypto industry.

Reflecting on the major incidents of 2023, we see a pattern of both sophisticated and traditional forms of cyber attacks. For instance, the Euler Finance hack in March led to a loss of almost $200 million due to rapid and suspicious transactions that were later identified as part of a large-scale hack​​. The Mixin breach in September, resulting from a data breach of the platform’s cloud service provider, led to a $200 million loss​​. Additionally, CoinsPaid faced a $37 million hack in August due to a phishing scam targeting an employee​​.

The Atomic Wallet hack in June affected over 5,000 user accounts, leading to a loss of $100 million​​, and the Curve Finance hack in July resulted in over $60 million in stolen cryptocurrency​​. TrustWallet users were targeted through phishing emails, leading to a theft of over $40 million in cryptocurrency​​. The MultiChain hack in July, suspected to be an insider job, led to the platform’s closure after a loss of $125 million​​. A data breach at LastPass in October resulted in $4.4 million in cryptocurrency being stolen​​, and the Stake platform suffered a hack in September with a loss of $41 million​​. Lastly, the CoinEx hack in September saw a theft of $70 million in crypto, a clear indication of the scale of these threats​​.

These incidents highlight a critical need for enhanced security measures in the cryptocurrency industry. The integration of more robust cybersecurity strategies, including better protection against traditional Web2 vulnerabilities, is crucial. The reliance on older security protocols in a rapidly evolving digital finance landscape is proving to be a significant Achilles heel.

In conclusion, the cryptocurrency sector in 2023 has faced substantial security challenges, with traditional Web2 flaws being a significant contributor to these vulnerabilities. The industry must adapt quickly to these evolving threats by incorporating more advanced security measures and educating users on best practices to safeguard their assets.

This is a DAO submission authored by James

This article is an individual contribution from a member of the Secret3 DAO and has been approved through our community voting process. The views and opinions expressed in this article are solely those of the author and do not necessarily mirror the views and policies of the Secret3 platform or the wider DAO community. Secret3 and its DAO community disclaim any responsibility for the accuracy, completeness, or validity of the information contained in this article. Readers are encouraged to exercise discernment and to consider the content as the author’s personal insights and opinions.

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