Alongside self-fertile crops and low-carbon shipping, cryptocurrencies made the World Economic Forum‘s (WEF) list of top tech trends in 2022, backed by research from the Thomson Reuters Foundation that describes them as passing from the “margins of finance to the mainstream”. ‘.

Perceptions about cryptocurrencies have changed, with several countries adopting it as legal tender, banks seeking to create their own forms of digital currency, and consumers placing their savings in crypto wallets instead of traditional financial institutions.

Countries are considering or already partially using central bank digital currency (CBDC), which essentially allows businesses and individuals to make payments using digital currencies directly, as opposed to more traditional payment methods. However, as Anna Collard, SVP Content Strategy & Evangelist at KnowBe4 Africa points out, there are risks.

“The cryptocurrency ecosystem is still very close to the Wild West,” she says. “According to Elliptic’s DeFi: Risk, Regulation and the Rise of DeCrime report, over $12 billion in losses have been suffered by DeFi users and investors, due to theft and fraud via the malicious exploitation of flaws in decentralized applications (DApps), decentralized exchanges (DEX), lending protocols and asset management offerings.

Concerns about vulnerabilities posed by cryptocurrencies are not new. Several countries have implemented increasingly complex bans on them, including China, Bangladesh, Qatar, Nigeria, Egypt and Morocco; while others envision increasingly stringent controls over how these currencies are managed and accessed.

“Crypto platforms and services use third-party websites and service providers that are off-blockchain to interact with their customers. They host websites, APIs from other providers, and use messaging or chat services, like Discord, and each of them opens up a new loophole for criminals,” says Collard.

“It could be used to phish their customers, scam them, hijack accounts and steal data, or gain the trust of users so they can steal their information. These are just a few of the opportunities for fraud, and people need to be prepared for these risks and take steps to protect their funds.

A smart step is to transfer funds from a hot wallet to a cold wallet, or cold storage, as soon as possible. These are named accordingly because they are not directly connected to the internet and store users’ private keys offline to ensure that no one on the internet can tamper with them.

They add a new level of protection that can mitigate the risk of your secret key being stolen by malware on your computer, for example. This provides a level of protection, but will not help protect against phishing scams that attempt to trick people into authorizing payments, providing their key to scammers, or falling for one of the other fraudulent crypto investment scams.

This is why it is really important to fully understand the complexities and vulnerabilities that come with cryptocurrencies so that you can protect yourself intelligently.

There are also issues with the platforms and marketplaces themselves, many of which are teeming with scammers who commit commercial malpractice, defraud people, and commit scams. They didn’t disappear just because the currency moved to digital platforms.

“Smart contracts are pieces of code that are used by crypto platforms, exchanges, and other players to perform transactions on the blockchain. These pieces of code are written by software engineers who, like any other human being, make mistakes. So what cybercriminals do is sift through GitHub and look for known or reported vulnerabilities that they can often use to steal from platforms directly,” Collard concludes.

“If the world is serious about moving towards cryptocurrencies as a more accepted form of traditional finance, the ecosystem must first address its security (and sustainability) issues. And potential investors or users must understand the inherent risks in this market, do their best to protect their wallets, stay aware of social engineering and stay ahead of scams.

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Edited by Luis Monzon
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