WazirX Hack, a $250 Million Lesson?
Crypto investments are becoming a norm, even in the developing nations. Cryptocurrencies have proven one thing: the digital future is inclusive and for all. But with the rising investments and interest from a wider section of society, comes the higher risk. As millions of investors are participating in crypto trading and investments, the risk has multiplied exponentially. We all know with great potential comes great risk.
It’s non-negotiable for investors and traders to pick the right, reliable, and efficient platform to trade, store, and manage their crypto assets. There have been a lot of instances recently where these risks have shown traders and investors to move ahead with caution. In this blog, we will talk about some of these instances and what went wrong. We will also explain some precautions you should take as a crypto trader or investor.
So, let’s begin.
What Happened at WazirX?
The core idea behind blockchains was to enhance the security and anonymity of the transactions. The big crypto platforms where crypto transactions occur boast of their security and reliability. But bigger is not always the better, right? Sometimes, hackers identify the chunks in these platforms’ armor and penetrate them inside. And once they are inside, they have practically a free hand to do whatever they wish to. Every year, multiple such attacks occur on platforms with weaker security and firewall protection.
Now, the problem is, who will be the final victim here? The best example is a recent cyber attack on India’s most popular crypto platform, WazirX. A few days back, a cyber attack on WazirX resulted in the most dreaded fear of investors and traders. They lost almost $230 million! That was almost 45% of the customer funds held in a single wallet. This shocking news obviously shook the entire investors and traders community. It revealed one clear fact: the big crypto platforms do not guarantee better security! On the contrary, they are at more risk. Reason? Well, hackers have better chances of making more money via attacks on big platforms because they have more customers.
What’s more worrying is this attack is not an isolated incident. In the past, many big platforms have faced the wrath of hackers. They always find new ways to exploit the weaknesses in such big platforms. While these platforms do have a reputation for reliability, the breaches regularly expose their vulnerabilities. Now, the problem is, who will be the final victim of these attacks? Sometimes,
it’s possible to retrieve this money, and sometimes, it’s not. So either the investors lose the money or the platform. WazirX announced after the attack that they would restore the accounts as they were before the hack. This will ensure that the investors will not lose the money, at least for now. But these attacks have surely given a wake-up call to the investors. They have to invest and trade via a reliable crypto trading platform that has features like military-grade encryption and 2-factor authentication.
Risks of Inadequate Security
When it comes to digital assets, security is non-negotiable. A single breach can result in the loss of millions, if not billions, of dollars. The system of security is entirely different here. In traditional financial systems, there are layers of protection and insurance. But here, the sole responsibility for security falls squarely on the shoulders of the platforms and, by extension, the users themselves.
Here are some primary risks of inadequate security:
Storage in Single Wallet:-
This is a big challenge. A lot of crypto platforms store their assets in a single wallet. The same thing happened with WazirX, so when a hacker is able to get access to this one single fund, POF! They might empty the entire wallet at their will. So, as an investor, I always prefer to pick a platform that stores their assets in multiple wallets. For e.g., at Visiion.io, we spread our assets to multiple high-security wallets. This reduces the risk a lot.
Lack of Constant Monitoring
Another critical aspect of security is the need for continuous monitoring and upgrading of security protocols. If you want to ensure maximum security for your crypto assets, make sure your crypto platform has features like 2FA (2-factor authentication). Such features can reduce the risk of your portfolio being hacked.
Cheap is not always good
We agree that crypto platforms should charge minimal fees to ensure financial inclusivity for all. But these platforms do need a lot of funds to secure your assets. So if you are picking a platform that offers minimal charges and brokerage, it’s possible that they might have to cut corners in terms of security. The reason is simple: security systems do not come cheap.
Trust Is The Key
When someone puts their hard-earned money into any platform, they are doing it because they trust the platform. They strongly believe that the platform will ensure the safety of the money. However, it is precisely this trust—or the lack thereof—that can make or break a crypto exchange. At Visiion, we are solely focused on building and protecting this trust. Here are 3 pillars on which we have built our platform
- Transparency:- We believe you have users who have every right to know what security measures are in place. So you can explore our website to check out what security protocols do we have on our platform.
- Proactivity:- We believe offense is the best defense. So, we actively work to identify and fix any potential security risks that might remotely impact our platform.
- Accountability:- In the event of a breach or other security incident, we acknowledge the issue and take every possible step to mitigate the damages and ensure your fund’s safety. How does the platform respond? Are they quick to acknowledge the issue and take steps to mitigate the damage, or do they downplay the severity of the situation? Accountability is crucial in maintaining trust.
- Diversified Storage Solutions:- Unlike other platforms, we diversify our asset storage. We distribute it across multiple wallets to ensure even in the rare event of a breach, the impact is minimized.
- Continuous Security Upgrades:- We constantly upgrade our security infrastructure to ensure the best security measures. We regularly update our protocols to address new threats and ensure that your assets remain safe.
- User-Centric Approach:- At Visiion.io, we protect the people and their assets. We understand that your investments represent your hard-earned money, your dreams, and your future. That’s why we prioritize your security and provide a platform you can trust.
What Investors Can Learn From the WazirX Incident?
The breach at WazirX is a stark reminder that security and trust are paramount in the crypto industry. While the crypto platforms might have built a strong reputation, such incidents expose their security lapses. The concentration of funds in a single wallet, combined with a lack of sufficient preventive measures, creates an environment where such breaches become inevitable.
In response to the breach, some other platforms took proactive steps to reassure their users. For example, CoinDCX, another major Indian crypto exchange, announced the creation of an investor protection fund. This fund will compensate users in case of a security breach. This move was a direct response to the WazirX incident and how platforms can better prepare themselves.
However, not all platforms have the resources or the foresight to implement such measures. This is why it is critical for users to do their due diligence when choosing a crypto exchange. It’s not enough to simply go with the most popular or the one with the lowest fees. Platforms like Visiion.io might be new, but they have robust security systems, better threat assessments, and more focus on securing the investments of their users. So, pick wisely.
