Looking Beyond Multisig and How the Recent Bybit Incident Is Reshaping Cryptos’ Security Ethos
Owing to the crypto market’s immense dynamism, security practices that were once considered gold standards have tended to become outdated quite quickly, especially as miscreants have continued to devise increasingly sophisticated infiltration techniques.
To this point, February 2025 marked a pivotal moment in the industry’s security evolution as Bybit, one of the world’s largest cryptocurrency exchanges, experienced a $1.5 billion heist — making it one of the largest digital asset thefts in history.
However, what made this incident particularly significant was not just its unprecedented scale, but how it seemed to challenge many of the fundamental assumptions most experts held about crypto security.
For example, the combination of cold wallets and multi-signature (multisig) protocols has historically been viewed as an impenetrable pairing. However, considering Bybit was using the same standard has prompted a necessary industry-wide reassessment of security practices, ushering in what many experts call “the next generation” of digital asset protection.
The situation, explained, in detail!
Prior to February 2025, the crypto industry operated under a widely accepted security framework of cold wallets (offline storage) combined with multisig protection (requiring multiple authorizations for transactions) — an approach that for many years had successfully protected billions in digital assets.
But on Feb 21, as Bybit CEO Ben Zhou handled what appeared to be a routine transaction, North Korean hackers compromised the exchange using a ruse that manipulated what the exchange’s operators could see rather than breaking the platform’s encryption or exploiting its code vulnerabilities.
Subsequently, Zhous acknowledged that they should have “upgraded and moved away from Safe,” referencing the free storage software that hackers manipulated to execute their plan.
That being said, what distinguished Bybit’s response from other scenarios of a similar nature was their remarkable operational resilience such that despite the substantial breach, the exchange promptly processed over 350,000 withdrawal requests (all within just 12 hours of the compromise).
Not only that, within 24 hours of the incident, Safe too had implemented enhanced security measures including stricter transaction validation protocols, AI-driven monitoring systems for real-time threat detection, and additional verification steps for transaction hashes, data, and signatures.
Are we witnessing the emergence of a new security frontier?
From the outside looking in, the Bybit incident seems to have accelerated the adoption of advanced security technologies that go beyond traditional multisig approaches as evidenced by the fact that security experts are now emphasizing that crypto exchanges handling billions in customer assets require specialized enterprise-grade solutions rather than general-purpose tools.
In this context, the industry now seems to be moving toward a new digital frontier known as Multi-Party Computation (MPC) wallets wherein cryptographic keys are distributed across multiple secure environments, significantly reducing single points of failure.
To elaborate, these systems are specifically designed to withstand sophisticated social engineering attempts and user interface manipulations — which were precisely the vulnerabilities exploited in the Bybit attack.
Another crucial development has been the adoption of “clear signing” technology that is designed to ensure that transaction signers have complete visibility into the details of what they’re authorizing, thereby providing additional verification channels to flag any potential discrepancies.
Last but not least, security firms are starting to recommend a zero-trust security model wherein companies treat every device and interface as a potential point of compromise, thus requiring independent verification channels (alongside air-gapped signing devices dedicated exclusively to authorization processes).
Growing and learning without playing the blame game
One thing that has been particularly eye opening about the entire episode is how even the most technically competent organizations can sometimes fall victim to well-orchestrated attacks that exploit the human element of security systems.
Therefore, rather than linking this failure specifically to Bybit, security experts have largely viewed the incident as one that has revealed industry-wide vulnerabilities that had previously gone unaddressed.
Moreover, it also seems to have shone a light on the camaraderie shared between the industry’s largest players as within just hours of the compromise, several popular exchanges offered to extend immediate liquidity support — with Bitget CEO Gracy Chen going as far as extending a $100 million loan requiring no collateral or interest-based repayments.
Thus, looking ahead it appears as though the events of the last few months will most likely usher in the adoption of comprehensive end-to-end security frameworks that can address both the technical and human vulnerabilities exposed by this episode. Interesting times ahead!!
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
