Crypto Recovery Requires More Aggressive Fraud Solutions

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It is no exaggeration to say that our industry is going through a difficult time. We’ve been in the midst of a crypto winter for some time now, with mainstay prices including Bitcoin (BTC) and Ether (ETH) plummeting. Similarly, monthly non-fungible token (NFT) trading volumes have fallen more than 90% since their multi-billion dollar peak in January this year. Of course, these declines were only exacerbated by the many black swan events that rocked the crypto world, such as the collapses of FTX and Three Arrows Capital. Taken together, it should come as no surprise that crypto is facing a trust deficit.

While the destructive actions of reckless CEOs must be addressed and those responsible for these events must be held accountable, our industry cannot stop there if we are to rebound. To address the trust deficit that crypto faces, better end-user security against the threat of scams and hacks must be a priority.

You do not think ? According to research firm Chainalysis, $3.2 billion in digital assets were stolen in 2021. It doesn’t look any better for our industry this year, with $718 million in overall hack-related losses reported. in October only. When it comes to scams, the picture darkens as report after report shows that known crypto scams, such as rug pulls and wallet drainers, are on the rise. Between July 2021 and August 2022, $100 million in investor funds were lost to unsophisticated NFT scams. And that number is likely an underestimate given that most NFT scams are micro-scams affecting individual users that never get reported.

Related: Developers Could Have Prevented Crypto 2022 Hacks If They Had Taken Basic Security Measures

Phishing links trick end users into emptying their wallets. Prominent schemes with videos promising HUGE RETURNS to trick people into downloading bogus software that gives crooks access to their assets. Even direct attacks that disrupt decks like Ronin and Nomad. Look around and you will see that scams and hacks are not only costing the crypto industry billions in digital assets, they are eroding trust in crypto in a way more significant than even the black swan events. of 2022.

Of course, we can avoid and hunt the Sam Bankman-Frieds and Do Kwons and all the other bad actor CEOs. But if we want to convince the general public and customers that crypto is safe to interact with and invest in, we need to tackle the problem of scams and hacks head-on.

How exactly can we make Web3 safe for everyone? The basic tenets of cryptocurrency lie in decentralization, transparency, and immutability. Crypto should be for everyone, and for that to be the case, we as an industry need to reduce the effort required from users and the associated level of risk when it comes to getting started with crypto, qu whether it’s buying or trading NFTs, or buying and selling Bitcoin. As things stand, cryptography is too complex and hard to understand for ordinary people. Without better anti-scam tools and software, it’s just too easy for scams and hacks to happen and spread.

Related: 5 Tips for Investing in a Global Recession

The development of anti-scam tools is certainly a way for our industry to turn the tide against scams and hacks. The continued increase in investment in layers of security and systems for compensating users in the event of loss due to hacking or scams will help. But if the cost and headaches of end-user security remain higher in crypto than in traditional finance, robust mainstream adoption will never happen. This is perhaps our biggest obstacle to rebounding as an industry and integrating the next 100 million users.

The first step in solving a problem is to recognize one. Our industry has a trust deficit, and scams and hacks are just as tied to it as the FTX and Three Arrows debacles. Crypto is often colloquially referred to as a dark forest, where parties to the transaction identified as exploitable usually end up being exploited (or destroyed). Personally, I don’t want to live in a dark forest, and neither do users. It is up to us to create an enlightened path forward. End-user security can no longer be just a buzzword for our industry, it must be a key pillar of our recovery.

Riccardo Pellegrini is the co-founder and CEO of Web3 Builders. Previously, he held positions as Product Manager for Amazon Web Services Data Exchange and CEO of Crossfield Digital. He completed his undergraduate career and earned an MBA from Harvard University.

This article is for general informational purposes and is not intended to be and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are the sole authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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