Key Takeaways:
Industry experts are reexamining traditional, centralized security measures amid rising vulnerabilities. The incident fuels calls for stronger key management and proactive monitoring systems. There’s growing momentum for decentralized solutions to mitigate systemic crypto risks. The debate hints at upcoming shifts in both technical safeguards and regulatory oversight.At ETHDenver, held in late February 2025, discussions prominently focused on the recent $1.5 billion Bybit hack.
The breach, occurring earlier in the month, was attributed to vulnerabilities within Safe wallet infrastructure rather than Bybit’s internal systems.
In response, Bybit released a forensic review confirming their internal security remained intact, pinpointing compromised Safe wallet infrastructure as the cause.
Cryptonews interviewed industry experts at ETHDenver to explore how this hack could have been prevented and assess its wider implications for crypto security.
The Role of Centralized Services in Crypto Security
Kai Wawrzinek, co-founder of Impossible Cloud Network, believes the hack highlights the risks associated with relying on centralized cloud services.
“While certainly not the main cause of Bybit’s record hack, compromised credentials at Amazon Web Services (AWS) certainly played a role and underline the many issues that accompany overreliance on centralized services, especially cloud services when it comes to these kinds of advanced hacks,” said Wawrzinek.
“Indeed, centralized infrastructure (in this case AWS) negates many of the benefits of decentralization of the Safe Wallet,” said Wawrzinek.
He added that the problem goes beyond Safe itself, highlighting an ongoing lack of understanding about decentralized solutions and the industry’s need to build trust in these alternatives.
Wawrzinek also pointed out potential benefits of decentralized cloud solutions. “But now, there are decentralized cloud alternatives that remove that single point of failure risk, greatly reducing the possibility of a hack executed in this manner,” he said.
Although he acknowledged no solution offers a complete guarantee, Wawrzinek emphasized that adopting decentralized cloud infrastructure is a critical step in combating hacks and exploits.
Key Management Policies Under Scrutiny
Oliver Gale, CEO and co-founder of Panther Protocol, argued that the hack resulted from poor key management policies rather than a fundamental flaw in centralized exchanges.
“One can expect increasingly sophisticated attacks on crypto wallets, particularly those of high value. There is a balance to be struck between practical utility and security of funds, and it is shocking that in the case of Bybit, they didn’t use an air-gapped device when sending $1.4 billion worth of ETH,” said Gale.
He also criticized Safe for failing to implement stricter security protocols.
“It is inexcusable for ‘Safe’ to have allowed such a security lapse to undermine a critical infrastructure player in crypto. As far as we have come, there’s a long way to go,” he added.
Gale believes centralized exchanges need to allocate more resources toward security proactively.
“This isn’t a centralized exchange flaw but rather a flaw in key management policies. Centralized exchanges should spend a percentage of their revenue quarterly on security systems—treat it like an insurance policy. Bybit has damaged its liquidity due to an exodus of capital from their venue. However, the CEO’s transparent disaster management, ongoing service of withdrawals, and commitment to cover losses mean they should survive this long-term,” said Gale.
Decentralized Storage Mitigates Impact of Hacks
Phil Mataras, founder of decentralized data storage network AR.IO, emphasized the importance of decentralized, tamper-proof storage in mitigating hack impacts.
“When these attacks happen, it highlights an important use case for permanent decentralized cloud storage, which creates a permanent record for data that is tamper-proof,” said Mataras. “On a blockchain like Arweave, the changes could be tracked, verified, sourced, and users could then ‘roll back’ to the version prior to when the hack occurred.”
He explained further that although transactions from the hack itself can’t be reversed, restoring applications to their pre-hack state would effectively prevent additional malicious activity.
Mataras suggested such a system would provide critical backup infrastructure for exchanges and wallets, helping mitigate security failures.
Systemic Vulnerabilities in Centralized Exchanges
Louis Bellet, lead architect at decentralized clearing network Yellow, told Cryptonews that there are fundamental risks posed by centralized exchanges, stating that Bybit’s hack is part of a larger security challenge in the industry.
“The Bybit hack is a critical reminder of the vulnerabilities seen in centralized exchanges and how easily they are prone to failure,” said Bellet. “Regardless of the security measures advertised by these platforms, they still hold single points of failure while simultaneously asking for users’ trust—yet, when compromised, billions can be lost in moments.”
He further emphasized that the Bybit hack illustrates not just a single event but a systemic issue affecting exchanges broadly.
Bellet stressed that unless the industry adopts better security standards, hacks like Bybit’s will continue to threaten trust and liquidity in the market.
What’s Next for Crypto Security?
The Bybit hack has reignited discussions around best security practices, with experts agreeing decentralized solutions could offer a more robust alternative to centralized services.
Whether through decentralized cloud storage, improved key management policies, or eliminating single points of failure, the industry faces critical choices.
Yet, the broader crypto industry faces a critical juncture: will this latest breach finally lead to meaningful reforms in security practices, or will the cycle of reactionary measures continue, exposing users repeatedly to risk?
How the sector responds in the coming months will determine not only the future of individual platforms like Bybit but the credibility of crypto markets as a whole.
Frequently Asked Questions (FAQs)
At $1.5 billion, Bybit’s breach ranks among history’s largest crypto hacks, surpassing the Ronin Bridge attack ($620M) and approaching Poly Network’s incident. Unlike previous code exploits, this targeted wallet infrastructure.
This breach exposes inherent weaknesses in centralized crypto security, revealing that even stringent protocols can fail due to human error. It highlights the need for decentralized systems and improved key controls.
Expect stricter requirements including mandatory cold storage percentages, independent security audits, and proof-of-reserves attestations. Jurisdictions where Bybit operates may lead with new custody regulations.
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