Crypto recovery requires more aggressive fraud solutions
We need to do more to ensure that cryptocurrency investors are confident after 2022. Opinion Ho-ho-ho! Limited Holiday Trait Since January, we have been experiencing a “crypto winter”, with mainstays like Bitcoin (BTC), and Ether (ETH) falling. The monthly trading volumes for nonfungible tokens (NFT) have also fallen by more than 90% from their multibillion-dollar peak in January. These declines were only exacerbated by the many black swan events that rocked the crypto world like the FTX or Three Arrows Capital meltdowns. It shouldn’t surprise that crypto is experiencing a trust deficit. If we want to rebound, our industry must address the destructive actions and culpability of reckless CEOs. Better security for crypto users against scams and hacks is a priority to address the trust gap. Chainalysis research estimates that $3.2 billion worth digital assets was stolen in 2021. The outlook is not good for our industry, with $718million in hacking-related losses reported in October alone. The picture is worse for scams. Report after report shows that well-known crypto scams like wallet drainers and rug pulls are on the rise. Unsophisticated NFT scams cost investors $100 million between July 2021-2022. This is likely to be an underestimated number, as most NFT scams involve micro-scams that impact individual users and are not reported. Developers could have prevented the 2022 crypto hacks by taking basic security measures. Phishing links trick users into emptying their wallets. Front-running schemes that promise “HUGE RETURNS” to get people to download bogus software to gain access to their assets are used to persuade them. Direct attacks on bridges such as Ronin and Nomad can be just as devastating. You’ll see that hacks and scams are not only costing the crypto industry billions of dollars in digital assets, but they’re also eroding trust in crypto more than the black swan events in 2022. If we want to convince customers and the general public that crypto is safe to use and invest in, then we need to tackle the problem of scams. Decentralization, transparency, and immutability are the core principles of cryptocurrency. Crypto should be accessible to everyone. To make it happen, the industry must reduce the effort required and associated risk for users to get started with crypto. This applies to buying or trading NFTs or Bitcoin. Crypto is too complicated and difficult to understand for everyday people. It’s too easy for frauds and hackers to flourish and spread without better tools and anti-scam software. Related: 5 tips to invest during a global recession. The development of anti-scam software is one way that our industry can turn the tide against hacks and scams. Investing in security layers and systems to compensate victims of scams or hacks will be a constant improvement. However, if crypto security costs and headaches for end users remain higher than traditional finance, mainstream adoption will not occur. This is the biggest obstacle to our industry’s recovery and onboarding the next 100,000,000 users. Our industry is experiencing trust problems. Hacks and scams have as much to do as the FTX and Three Arrows scandals. Crypto is often referred to as a “dark wood,” because transacting parties identified as exploitable are most likely to be exploited (or destroyed). I don’t want my life to be in a dark forest. Users also don’t want it. We must create a path that leads to success. Web3 Builders’ co-founder and CEO, Ricardo Pellegrini, believes that end-user security is more than a buzzword in our industry. He has previously held the positions of head of product at Amazon Web Services’ Data Exchange and CEO of Crossfield Digital. He completed his undergraduate degree at Harvard University and earned an MBA. These views, thoughts and opinions are solely those of the author and do not necessarily reflect the views or opinions of Cointelegraph.