Which security measures would prevent a repeat?

The recent hack on Bybit that led to the theft of $1.5 billion worth of digital assets is a wake-up call for the entire crypto industry. This attack exploited vulnerabilities in multi-signature authorization and UI spoofing tactics, deceiving users into believing they were transacting with the correct address when, in reality, the interface had been manipulated.

Even experienced crypto professionals can overlook such discrepancies without rigorous scrutiny. In the fast-paced environment of digital asset exchanges, these threats can easily go undetected. So, what’s the immediate solution?

Security isn’t just a feature; it’s the foundation of everything we do. To reinforce our defenses, we must implement the following measures without delay:

1. MPC middleware audit

As soon as the Multi-Party Computation receives an on-chain transaction request, it must validate the transaction against the Dynamic Ledger (Exchange Database) to ensure balances match. This is an immediate, automated step that exchanges can introduce to improve their ability to accurately confirm the identity of individuals transacting.

As well as ensuring that withdrawals receive the necessary reviews and auditing, integrating these initial steps that can pinpoint potential threats at an early stage is vital in mitigating the threat of high-value hacks.

2. Dynamic ledger verification

Dynamic ledger systems log every transaction state and perform background audits post-execution for absolute accuracy. Before approving any MPC-requested withdrawal, the system must cross-check the ledger to confirm its legitimacy. These systems keep a trusted record of each transaction, so they can be relied upon to deliver dependable results for any withdrawals that require further investigation.

3. Post-approval auditing

Every approved transaction must be reviewed to detect potential UI spoofing attempts. This adds an extra layer of security and can prevent platforms from becoming the victims of sophisticated hacks, just like we saw with the Bybit incident.

Audits should then be run periodically based on the volume of approved transactions. Implementing this process allows exchanges to constantly interrogate the systems they have in place and review whether the appropriate measures have been established for reviewing transactions.

4. Threshold and round-robin approval

Implementing a threshold-based MPC approval system eliminates single points of failure. Exchanges leave themselves vulnerable if they rely solely on one system to prevent breaches, and the ability to spread this responsibility across different branches of the organization will drastically improve resilience moving forward.

Additionally, round-robin approvals by treasury teams reduce insider threats and enhance accountability. Involving multiple stakeholders in delivering secure transactions will ultimately reduce mistakes, whether accidental or deliberate and raise the standards to which every team member must adhere.

5. Automated transaction auditing

Risk-based scoring should be applied to every deposit and withdrawal request before approval, with high-value transactions undergoing manual verification to ensure proper reporting and accountability.

Real-time monitoring systems should analyze deposits and withdrawals, with automated cross-checks for unusual spikes. If required, large transactions must be manually verified with a comprehensive report. Each withdrawal should undergo a transaction audit score assessment before being processed.

6. Continuous cybersecurity training

Regular cybersecurity training for treasury teams is crucial, as security is only as strong as the people enforcing it. Investing resources into ensuring employees have the necessary training to perform their roles to the highest level possible is a worthwhile investment for crypto platforms and will bolster security in the long term.

Exchanges should also conduct simulated security drills two to three times a month to assess response effectiveness. This allows firms to outline any potential weaknesses in processes or employee knowledge that can be immediately addressed, equipping the team with hands-on experience in handling potential cyber threats in the future.

7. Comprehensive insurance coverage

All hot and cold wallets must be insured to enhance operational security and risk mitigation. This protects the exchange itself and reassures investors that their assets have an added layer of financial security.

The Bybit hack is a clear indication of the level of sophistication that bad actors have reached in their attempts to orchestrate digital thefts. Therefore, offering insurance coverage is the right move for exchanges as the threat with which they’re faced is constantly increasing and evolving.

Prioritizing security, a key consideration

Security is a shared responsibility, and collaboration is key to making this space safer for everyone. Strengthening security frameworks, investing in cutting-edge technology, and staying ahead of potential threats should be a priority for organizations across the entire crypto ecosystem.