The recent security incident at Bybit, the second-largest cryptocurrency exchange globally, resulted in outflows totaling approximately $1.5 billion. With $20 billion in customer assets, Bybit faced a considerable challenge when an attacker exploited security measures during a routine transfer from an offline “cold” wallet to a “warm” wallet designated for everyday trading.
Preliminary investigations indicate that the vulnerability stemmed from a custom Web3 implementation involving Gnosis Safe, a multi-signature wallet. This wallet uses off-chain scaling approaches, has a centralized upgradable structure, and features a user interface for signing transactions. The attacker used malicious code via the upgradable framework to change what appeared to be a regular transfer into an altered contract. This incident prompted around 350,000 withdrawal requests as users hurried to protect their assets.
Despite the substantial nature of the breach, which is estimated to be less than 0.01% of the total cryptocurrency market cap, it showcases how situations that would have previously constituted a crisis are increasingly manageable operational challenges. Bybit’s immediate commitment to cover any unrecovered funds through its reserves or partner loans highlights its growth.
Historically, human error—not technical flaws in blockchain protocols—has been the main vulnerability within cryptocurrencies. Research over the past decade has revealed that human factors have consistently played a dominant role in major security breaches; for instance, around $2.2 billion was stolen in just 2024.
Notably, these breaches are often due to organizations failing to secure their systems because they do not acknowledge responsibility for them or because they opt for custom-built solutions that artificialize their distinctiveness from established security frameworks. This tendency to reinvent rather than adapt proven security strategies continues to expose vulnerabilities.
Shift Toward Human-Centric Security Solutions
To effectively tackle what is essentially a human issue, the cryptocurrency industry must pivot towards human-centric security measures. While substantial investments have been made in technical safeguards, minimal resources have been allocated to mitigate the human factors that contribute to security breaches.
It is crucial for organizations to explicitly define which aspects of their systems they manage and are therefore liable for securing. Once this accountability is established, implementing behavioral analytics to identify irregular patterns, requiring multi-party authorizations for significant transactions, and adopting “circuit breakers” to limit potential damages in the event of a compromise will enhance security significantly.
