Opinion by: Orest Gavryliak, Chief Legal Officer, 1inch Labs
The Crypto Conundrum: Navigating Security in a Decentralized World
Back in February, the Bybit breach set a brand new, albeit unlucky, benchmark within the crypto world. A staggering $1.4 billion vanished in mere moments, spirited away by North Korean cybercriminals. This audacious theft was splashed across global headlines. Fast forward to the primary half of 2025, and TRM Labs reports that crypto attacks have cost the industry a jaw-dropping $2.1 billion. It seems the hacking spree shows no signs of slowing down.
While these daring heists have captured much attention, there is a glaring lack of deal with how these hackers manage to wash their loot. Centralized exchanges (CEXs) and DeFi protocols have some serious reflecting to do, albeit for various reasons.
Rethinking Security at Centralized Exchanges
For trading platforms that hundreds of thousands depend on, it’s high time for a security overhaul. Gone are the times when an easy user interface summary would suffice. Now, there is a pressing have to manually decode call data to be sure that funds from cold wallets safely reach their final destinations.
Innovative solutions, comparable to “intelligent co-signers,” are stepping as much as the plate. These smart tools validate transactions and signatures, robotically blocking suspicious requests even when all approvals are in place. Pre-signature transaction simulations and real-time threat intelligence flagging dangerous call data are also becoming the norm.
Recent hacks have shown how interfaces could be manipulated, tricking executives into green-lighting malicious transfers. A whopping 80% of crypto stolen this 12 months was as a result of infrastructure exploits, which are inclined to haul in tenfold the loot in comparison with other kinds of attacks. Clearly, CEXs have to adapt to this recurring threat.
DeFi: Rising to the Challenge
Decentralized Finance (DeFi) protocols need to make it tough for hackers to treat them like a private ATM. The first move is to fortify defenses against potential attack routes. When cybercriminals try to funnel stolen assets through decentralized platforms, further enhancements are crucial.
Bybit’s CEO, Ben Zhou, felt the frustration firsthand when attempting to freeze the ETH stolen from his exchange. The funds were cleverly dispersed across quite a few wallets, making recovery a logistical nightmare. In his podcast, “When Shift Happens,” he shared how the funds kept moving before any response from contacted platforms may very well be made.
That’s precisely why DeFi protocols need to spice up their defenses, mixing risk intelligence, transaction monitoring, and comprehensive risk management software, all while maintaining decentralization. Some solutions offer around-the-clock intelligence, paired with human oversight to swiftly tackle incidents.
Advanced risk management tools can screen interactions and transactions, monitor wallets, and apply real-time risk evaluation. This multi-layered approach helps detect malicious activities quickly, letting security teams act decisively and stop further losses.
In the crypto space, cooperation is not just about good PR; it’s about forming a united front against those threatening the industry’s future. Each hack erodes consumer trust, and if unchecked, may lead to regulatory crackdowns that punish law-abiding crypto users and developers alike.
The Path to Self-Regulation
DeFi protocols, by their nature, welcome all users and do not police transactions like centralized alternatives. This non-custodial model means developers cannot freeze illicit funds, which regularly results in misplaced blame from lawmakers who don’t fully understand the system.
Recent breaches should function a wake-up call. DeFi developers have to unite in crafting robust governance and security frameworks that evolve with technology. Well-designed protocols and ongoing security audits can deter thieves, making crypto hacks less appealing.
If the crypto world fails to self-regulate, it risks becoming a cautionary tale against free-market ideals. Traditional finance operates under strict rules enforced by regulators, offering a buffer against systemic risks. In contrast, DeFi thrives on eliminating intermediaries, which presents challenges regarding sustainability without some type of governance.
The sweet spot is likely to be an 85% free market, with the remaining 15% dedicated to a programmable rule layer ensuring security and trust without stifling innovation. Think of this as protocol-level guardrails—open-source, community-driven standards that maintain openness while enhancing accountability.
DeFi doesn’t have to mimic traditional finance to mature, but unchecked freedom may lead to chaos. The goal is to future-proof innovation through shared standards, ethical design, and resilience. The journey won’t be easy, however the potential rewards are immense.
Opinion by: Orest Gavryliak, Chief Legal Officer, 1inch Labs.
This article is for informational purposes only and shouldn’t be intended as legal or investment advice. The views expressed are solely those of the writer and don’t necessarily reflect the views of Cointelegraph.
Image Credit: cointelegraph.com
