The crypto market has witnessed countless attacks and exploits throughout the year. This has directly affected the overall adoption rate. Ergo, technological innovation is imperative to protect client assets and help exchanges and businesses stay one step ahead of hackers.
Numerous security challenges, including theft, hacking, and fraudulent activity, have accompanied the rise of cryptocurrency and blockchain technology. These events damaged the reputation of the industry and hampered widespread adoption.
Exploring different vulnerabilities
Hackers involved in illicit activities related to cryptocurrency are on the rise. The spotlight is once again on the vulnerabilities of crypto exchanges and the assets they exchange. 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 major hit to their reputations due to recent exploits.
In general, the crypto industry faces numerous security challenges. Some of the most significant security hurdles facing the crypto industry are:
- To hack: One of the biggest security challenges in the cryptocurrency industry is hacking. Cryptocurrencies are stored in digital wallets; if they are not properly protected, they can be hacked and funds can be stolen.
- Phishing scams: Another major security challenge facing the cryptocurrency industry is phishing scams. Cyber criminals 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 for the cryptocurrency industry. Employees with access to sensitive information or cryptocurrency wallets may misuse their privileges or leak information to third parties.
- malware: Malware, such as viruses, Trojans, and ransomware, can also pose a significant security threat to 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 like money laundering, terrorist financing, and tax evasion. These challenges can affect the security of the industry by making it difficult to implement adequate security measures.
The security challenges facing the crypto industry are complex and multifaceted. Therefore, tackling them requires a comprehensive approach that includes technological solutions to start the journey.
Looking for answers to increase credibility
Various technological innovations can help protect client assets and allow exchanges and businesses 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 multiparty reckoning (MPC) technology. MPC allows multiple parties to jointly compute a function without sharing their private inputs. In the context of blockchain and cryptography, MPC protects the private keys needed to access a user’s funds. By splitting the key into multiple parts and distributing it among different parts, MPC can avoid a single point of failure and improve security.
BeInCrypto reached out to Halborn, a blockchain cybersecurity firm, about the issue. When asked about the key features and benefits of MPC, the team responded:
“If a user’s private key is lost or stolen, the funds stored in the wallet can 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 among 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 instead of accessing the 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
Continuing, another technology that can strengthen security is homomorphic encryption. Homomorphic encryption allows calculations 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, Co-Founder and CEO of sunscreen, believes that fully homomorphic encryption (FHE) holds even more promise in its potential to bolster blockchain privacy. Solomon explained that the technology allows people to perform calculations on encrypted data without decrypting it.
Zero Knowledge Proofs also improve security in the crypto industry. Zero-knowledge proofs allow 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 identities of the parties or the details of the transaction. This can enable secure and private transactions while preserving the transparency and immutability of the blockchain.
Finally, decentralized identity (DID) Solutions matter in the cryptocurrency industry. DID solutions allow 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, improve privacy, and enable secure access to digital services.
Technological advancement is essential
Technological innovations are critical to protecting client assets and helping exchanges and businesses stay one step ahead of hackers. The crypto industry faces numerous security challenges. Still, various technological innovations can safeguard customer assets and allow businesses and businesses to stay one step ahead of hackers.
These innovations include multi-party computing, threshold signatures, homomorphic encryption, zero-knowledge proofs, and decentralized identity solutions. By embracing these technologies and investing in security, the cryptocurrency industry can improve trust, promote widespread adoption, and realize the full potential of blockchain and cryptocurrency.
Following the Trust Project guidelines, this special article presents opinions and perspectives from industry experts or individuals. BeInCrypto is dedicated to reporting transparency, but the views expressed in this article do not necessarily reflect those of BeInCrypto or its staff. Readers should independently verify information and consult with a professional before making decisions based on this content.