Opinion: Anticipating Three On-Chain Cybersecurity Forecasts for 2024 as Scammers Multiply
Disclaimer: The author’s views and opinions expressed in this article are solely their own and do not represent the views and opinions of crypto.news’ editorial team.
The year 2023 has been marked by a downturn in the market and a strong focus on regulation and compliance, largely due to the major collapses and fraud incidents that occurred in 2022.
However, the cryptocurrency industry is known for its constant change, and it seems that change is already on the horizon. While the question of whether Sam Bankman-Fried and Changpeng Zhao will face jail time remains unanswered, the legal battles surrounding them seem to have settled down, and the industry is eagerly anticipating a new bull market in the coming year. The expected approval of a spot ETF and the upcoming Bitcoin halving are both contributing to the growing speculation.
While a change in market conditions may be good news, it also brings new challenges for web3 security professionals. Here are three major trends that will shape the web3 security landscape in the coming year.
The Rise of Hacks and Scams
Cybercrime in the web3 space tends to follow the ups and downs of the market. According to the US Federal Trade Commission, losses to crypto scams in 2021, when Bitcoin reached its all-time high, were sixty times higher than in 2018. However, the latest data from Chainalysis suggests that scam activity dropped by as much as 77% in 2023 compared to the previous year.
Nevertheless, Chainalysis points out that certain types of scams, particularly impersonation scams, are actually on the rise. Furthermore, if the market picks up in 2024, as many analysts predict, scammers will once again be attracted to the financial opportunities in crypto.
As a result, we can expect not only an increase in the number of scams but also a higher level of sophistication and consolidation in scammer activity. Advanced evasion techniques, such as spoofing, morphing, and obfuscation, are becoming more prevalent. Scammers are also targeting vulnerabilities in off-chain signatures, using signature phishing scams to trick users into signing transactions that allow scammers to steal their assets.
The recent shutdown of ‘draining as a service’ Inferno Drainer, which facilitated wallet theft, is a positive development for the industry. However, it is unlikely to be the last of its kind, considering it reportedly stole $80 million worth of crypto this year alone. We can expect more consolidation among scammers in 2024.
Expansion of Web3 Cybersecurity Capabilities
As fraud becomes more sophisticated, the web3 cybersecurity ecosystem is also evolving to combat scams and illicit activities. Attack detection protocols have already identified hacks, such as the $33 million theft from SushiSwap in April 2023, before the funds were withdrawn.
On-chain extensions, similar to wallet extensions, can further support threat prevention by monitoring risks in real time using on-chain data, providing an additional layer of protection for users and protocols.
Furthermore, the involvement of Traditional Finance (TradFi) and institutional liquidity in the web3 space will bring new dimensions to on-chain data and analytics. The industry, which is currently dominated by open, pseudonymous, and permissionless protocols, will increasingly operate alongside permissioned, compliant, and secure counterparts. This additional layer of data and information will enhance risk profiling capabilities, especially when combined with advancements in AI and machine learning.
A Strategic Approach to Web3 Cybersecurity
As the crypto and web3 space matures with each market cycle, projects and companies are realizing the need to go beyond code audits to demonstrate their commitment to cybersecurity and stay ahead of fraudsters. A comprehensive strategy that encompasses secure design, monitoring, and threat prevention solutions is essential.
A holistic approach to risk management should include preventive measures, such as asset segregation and transaction screening, as well as mitigation measures like automated circuit breakers, and reactive relief such as insurance.
To meet this demand, providers like Forta have developed cybersecurity tools, including blockchain scam detectors and attack detectors, specifically tailored to the needs and threats faced by web3 operators.
Looking ahead to 2024, the sense of optimism in the industry is palpable and well-deserved. However, web3 firms must be prepared for the new wave of threats that will accompany increasing wealth and liquidity in the market. It is crucial to have robust cybersecurity measures in place to protect assets and users.
Read more: Evolving threats in cryptocurrency: The outdated wallet dilemma | Opinion
Christian Seifert, Ph.D., is a researcher-in-residence at the Forta Network, a decentralized network that detects threats and anomalies on DeFi, NFT, governance, bridges, and other web3 systems in real-time. Previously, Christian spent over 13 years at Microsoft, most recently as a Principal Group Manager.
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