The recent $1.5 billion hack on Bybit, one of the world’s largest crypto exchanges, has shaken the crypto community. This attack, the largest crypto heist in history, highlights serious security vulnerabilities in centralized exchanges. If you store your assets on an exchange, this incident should serve as a reminder to rethink how you store cryptocurrency safely.
Bybit, like most major exchanges, secures funds using a multi-signature cold wallet system. The majority of its assets are kept offline, while smaller amounts are transferred to hot wallets for daily transactions. However, hackers found a way to bypass this security.
The attackers compromised Safe{Wallet}, a third-party wallet service used by Bybit. A hidden malicious script altered transaction details, tricking Bybit employees into approving an unauthorized transfer. As a result, the attackers drained a cold wallet holding billions in crypto. Investigations later traced the hack to Lazarus Group, a North Korean cybercrime organization known for targeting crypto platforms.
If a major exchange like Bybit can be hacked, no exchange is completely safe. Many experts now recommend self-custody—taking control of your own crypto instead of leaving it on exchanges. While this requires extra precautions, it significantly reduces the risk of losing assets to hackers.
One of the most effective ways to protect your funds is by using a hardware wallet. These devices store private keys offline, making them inaccessible to hackers. When choosing a hardware wallet, it is important to buy directly from the manufacturer and verify all transactions on the wallet’s screen before confirming.
Another key security measure is keeping your seed phrase safe. This 12- or 24-word recovery key allows you to restore your funds if your device is lost. Storing it digitally is risky, as modern malware can scan files and images for sensitive information. Instead, writing it down on paper or metal and keeping it in a secure place is the safest approach. For added security, some users choose to split the seed phrase into parts and store them separately.
Diversifying storage is also essential. Keeping all assets in one place increases the risk of total loss in case of a breach. A good strategy is to store small amounts on exchanges for quick access while keeping the bulk of assets in hardware wallets. Using separate wallets for different types of cryptocurrency can further improve security.
For those who frequently conduct crypto transactions, using a dedicated computer can help minimize exposure to malware and phishing attacks. This computer should be used only for crypto-related activities, kept offline when not in use, and protected with strong passwords and disk encryption. If a separate computer is not practical, setting up a separate user account on a primary device with restricted privileges can provide an additional layer of security.
Care should also be taken when using crypto software and updating wallets. Only downloading wallets from official sources ensures the software has not been tampered with. It is also advisable to wait a few days after a new update is released before installing it, allowing time for any security vulnerabilities to be identified by the community. Regularly scanning devices for malware is another simple but effective step in safeguarding crypto assets.
Finally, being vigilant against phishing scams is crucial. Hackers often use fake emails, messages, or websites to trick users into revealing their private keys or passwords. Checking website URLs carefully, ignoring unexpected messages requesting transactions, and staying informed about the latest scams can help prevent falling victim to fraud.
The Bybit hack serves as a strong reminder that cryptocurrency security is an ongoing responsibility. While Bybit has promised to compensate users, not all hacked exchanges do. Taking control of security by using hardware wallets, storing seed phrases safely, and practicing good digital hygiene can significantly reduce the risk of losing funds. In the world of crypto, security is ultimately in the hands of the user.
Other players in the crypto industry, such as Riot Platforms (NASDAQ: RIOT), will be taking notes and seeing how they can better protect themselves from cyberattacks like the one suffered by Bybit.
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