This is perhaps unsurprising for something based heavily on cryptography, but with crypto assets now surpassing a total market capitalization of USD 2 trillion, security has to be a key issue for every exchange, wallet, platform, user, and investor in the industry.
However, all too often this doesn’t quite appear to be the case, what with the number of decentralized finance (DeFi), crypto exchange hacks, and ransomware exploits we've witnessed this year. Sadly, industry players speaking with predict that things will get worse before they get better, with DeFi, centralized exchanges, crypto assets, and users themselves all facing challenges next year.
At the same time, as the market matures and new tools appear, the security offered on many platforms might see an improvement by the end of 2022.
DeFihas numerous internal characteristics and quirks that make it ripe for security problems or vulnerabilities, and these are likely to remain in place in 2022.
“One of the potential problems with decentralized finance, in terms of cyber-attacks, stems from the fact that, by definition, it’s unregulated in the way that traditional financial institutions are. The fact that there are organizations with little experience or knowledge of dealing with cyber-security issues compounds the problem,” said David Emm, the principal security researcher with Kaspersky’sGlobal Research and Analysis Team.
He explained that such inexperience and regulation leave scope for cybercriminals to exploit the situation. “For this reason, we might continue to see attacks on the sector,” he added.
At the other end of the spectrum, some industry figures are hopeful that 2022 will witness a gradual improvement, with DeFi vulnerabilities becoming less of them.
“The good news is that more tools to vet the security of those projects but also to help investors protect themselves from their own mistakes are coming to the market,” said Ouriel Ohayon.
Similarly, Chris Harding, the compliance officer at Civic, said that while the growth of Defi will attract bad actors, it will also provide platforms in the sector with expanded resources for strengthening their systems.
“As hackers grow shrewder with their approaches, so do the Defi project teams! Teams are learning every day and the community is collaborating on how to better protect against bad actors,” he said.
Harding also suspects that the involvement of regulators may have the positive effect of improving security within DeFi, in the sense of compelling platforms to introduce better protections for users.
Morethan a few crypto exchanges experienced hacks in 2022, while another common security issue (at least as far as protecting the value of your holdings goes) was the outages and service disruptions that even the biggest platforms --such as Binance and Coinbase --experienced on numerous occasions this year.