What We Can Learn From The Top Crypto Thefts and Hacks of 2021

BitMart Hacked of $200 Million Worth of Crypto Assets

Blockchain tech and smart contracts are increasingly being used to build decentralized applications (dApps). However, these dApps are often exploited by malicious actors who are able to find vulnerabilities in the source-code used to create these programs. Smart contract hacks and exploits have resulted in billions of dollars in losses during the past few years. These problems are so severe that companies like CertiK have been launched to help projects with auditing their codebase before they deploy solutions into production. 

Despite continuous efforts to write better code and build more secure apps, clever hackers still manage to find ways to exploit vulnerabilities in smart contract-based software. In August 2021, 

Poly Network lost a large amount of crypto-assets via a sophisticated hack. It was revealed at that time that Poly Network lost more than $600 million in what was reported to be the largest-ever DeFi attack.

Following the theft, Poly Network developers had asked the hackers to return the funds while requesting crypto miners to blacklist the digital tokens that were stolen during the security breach. Poly Network even posted a “Dear Hacker” letter, basically begging for the return of the assets while warning that the bad actors would be pursued if they didn’t comply with the requests. 

What we can learn from such attacks is that contracts carrying large amounts of funds regularly become an attractive target for hackers. The critical issue here is to develop solutions that can protect the nascent crypto ecosystem as well as vulnerable investors and traders. 

It’s worth noting that whatever the underlying or root cause might be of these hacks (for example, a compromised private key or a bug in a platforms’ source-code), it is always best to build applications that are based on a proven security model and strong fundamentals. 

Following Poly Network’s hack earlier this year, the platform joined Thorchain and Rari Capital as cross-chain protocols that have been breached. As explained by Michal Bartczak from Coinswap Space, these cross-chain protocols are quite different from solutions like UniSwap, and PancakeSwap, which have never been hacked.

Cross-chain protocols need to be implemented by using new source-code, Michal noted. It is quite challenging to effectively simulate an international network of hackers attempting to attack a particular protocol so new code can be vulnerable to damaging security breaches. Michal also mentioned that the high level of security found in solutions for DeFi swaps is not available in cross-chain protocols. 

According to Michal and other crypto industry experts, there will most likely be many different altcoins that will be widely adopted in the DeFi and crypto space. Industry analysts also think that the future of DeFi will be multichain, because a single or just few chains won’t be able to accommodate hundreds of millions (potential) of new users. The serious issues posed by these attacks can severely damage the reputation of DeFi platforms, causing users to lose faith in this technology. 

Leveraging the Industry’s Most Robust Security Model

Luckily, however, there are a number of projects that realize the potentially severe long-term consequences of not ensuring adequate security for blockchain protocols. In order to address these issues, a project called Syscoin aims to offer the best of Bitcoin and Ethereum via a single coordinated platform. 

As explained by its developers, the platform utilizes Bitcoin’s robust security and Ethereum’s Turing-complete programmability while ensuring L2 scalability by leveraging ZK-Rollups. According to its creators, Syscoin is a unique and viable alternative to Ethereum. It offers capabilities and functionality that isn’t available with other smart contract platforms currently in the market. For example, Syscoin has developed secure architecture and a foundation that’s capable of supporting advanced smart contract apps, without compromising on security 

Syscoin can potentially provide everything that can be done with Ethereum. This is made possible via Syscoin’s Network Enhanced Virtual Machine (NEVM). It’s worth noting, however, that Syscoin’s design keeps intact the “gold standard” security of the Bitcoin consensus mechanism as well as merged-mining. It also offers the best performance features that are expected in Ethereum’s 2.0 future deployment, thanks to L2 ZK-Rollup technology.

In addition to these capabilities, Syscoin offers opt-in features that may give projects regulatory compliance at scale for their digital asset’s transactions, without needing custodians. These features could prove to be quite useful because when projects are required to ensure compliance, then they will have to get serious about auditing their source-code. This in itself may help eliminate many costly smart contract issues. 

Syscoin’s architecture is also designed to leverage L2 scalability for smart contracts, and establish independent fee markets, which are powered by ZK-Rollups. The platform is also 

completely compatible with Ethereum, meaning that any Ethereum smart contract can be deployed on NEVM. 

Smart Contract Apps Deployed via a Highly Secure Foundation

Additionally, the platform has a proven and time-tested L1, because it utilizes Bitcoin merge-mined proof-of-work (PoW) and Bitcoin-compliant consensus. These robust security features help create a highly secure foundation, so that applications built on Syscoin cannot be breached so easily. 

The platform also uses decentralized quorum-based chainlocks at every block, which reportedly makes Syscoin’s L1 highly-resistant to selfish mining and reorgs. These design features make building apps on Syscoin even more secure and minimize the chances of malicious attacks..

With Syscoin, developers can build a safer DeFi ecosystem, as long-range MEV (Miner Extractable Value) is addressed by finality provided via chainlocks. And wherever Optimistic Rollups are needed, Syscoin’s finality makes safe settlements possible in a few hours, and not days or weeks.

As explained by its developers, Syscoin offers viability for decentralized Web 3.0 services, supported by numerous incentivized and independently operated full-nodes that are a part of Syscoin’s network. As noted by its developers, Syscoin is built with security in mind, as the protocol’s adaptation supports trustless portability of value between the two primary blockchain evolutionary paradigms, Bitcoin and Ethereum (SYS <-> NEVM), via a coordinated platform.

Notably, smart contract and DeFi protocol hacks have raised serious concerns about the long-term sustainability of the entire blockchain ecosystem. With projects like Syscoin being sharply focused on enabling robust security, the industry can greatly benefit from a secure foundation. By leveraging a solid base, it would become safer and more practical to build scalable, highly-performant dApps for a wide range of use-cases. 

Content writer by profession. A crypto lover and has passion for writing. Follows the developments of digital currency right from its launch, years ago.