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Blockchain investigator ZachXBT has criticized pseudo-decentralized protocols for profiting from exploits linked to North Korean hackers, raising concerns about the crypto industry’s ability to handle security breaches. The investigator highlighted the ongoing misuse of blockchain technology by bad actors, calling for greater accountability within the sector.

The Role of Pseudo-Decentralized Protocols in North Korean Exploits

In a recent statement, ZachXBT referred to the nearly $1.46 billion Bybit hack as an “eye-opening” example of the industry’s vulnerabilities. He warned that without stricter regulations, the industry could face significant setbacks. According to ZachXBT, some so-called “decentralized” protocols have generated a majority of their monthly volume and fees from transactions linked to North Korean exploits, yet they refuse to accept responsibility for their role in enabling such activity.

Among the protocols mentioned were mixing services like eXch and multi-currency platforms such as THORChain. These platforms allegedly facilitated the laundering of stolen funds from the Bybit hack. This illicit activity has made it increasingly difficult to trace stolen assets, with over $200 million of the stolen $1.46 billion reportedly rendered untraceable within weeks of the attack.

How Stolen Funds Become Untraceable

Bybit CEO Ben Zhou previously revealed that mixing services and protocols refusing to intervene contributed to the inability to recover stolen funds. These services act as intermediaries that obfuscate the origin of transactions, making it challenging for authorities and investigators to track stolen assets. The lack of cooperation from these platforms has raised questions about their role in fostering a safer crypto ecosystem.

Centralized Exchanges and Flawed Security Measures

ZachXBT didn’t stop at decentralized platforms. He also criticized centralized exchanges for their slow response times to illicit transactions. According to the investigator, while laundering stolen funds can take mere minutes, some exchanges take hours to respond, giving criminals a significant advantage.

Moreover, he argued that current anti-laundering measures like know-your-transaction (KYT) systems are “completely flawed and easily evadable.” Similarly, know-your-customer (KYC) rules were labeled a “honeypot for regular users,” as these systems often experience data breaches or insider leaks, putting user information at risk.

Lessons from the Bybit Hack

The Bybit hack, one of the largest cryptocurrency thefts in recent history, saw North Korean hackers steal approximately $1.46 billion worth of crypto. Reports indicate that the attack was carried out by compromising the computer of an employee at Safe, a technology provider for Bybit. This sophisticated heist has underscored the urgent need for improved security measures across the industry.

Steps Toward a Safer Crypto Industry

To address these challenges, industry players must take proactive steps to improve security and accountability. Here are some key recommendations:

  • Enhanced Transaction Monitoring: Both centralized and decentralized platforms should implement real-time monitoring systems to flag and halt suspicious transactions immediately.
  • Stronger Collaboration: Exchanges and protocols must cooperate with investigators and regulators to prevent bad actors from exploiting vulnerabilities.
  • User Data Protection: Strengthen KYC systems to minimize risks of breaches while maintaining user privacy.
  • Regulatory Compliance: Work towards creating industry standards that balance security with decentralization.

While the decentralized nature of blockchain technology offers numerous benefits, it also presents challenges that demand accountability and innovation. By addressing these issues, the crypto industry can better protect users and maintain trust in the ecosystem.

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