Before the massive financial loss, any means may appear, and now it remains to be seen whether Bybit's determination is stable and whether it is willing to spend another cycle of time to build a normal revenue model.

Author: Zuoyeweb3

Cover: Photo by Steve Johnson on Unsplash

Hackers Eat Their Fill, the General Laughs Heartily

I came from Dandong, taking your E, the general said nothing, only taking Bybit's Ether.

In the crypto memory, only Kraken has not experienced serious security incidents, with only a case of a large account being hacked and the stolen assets in 2019, and the Kraken main site seems to have never lost any assets, of course, this may also be due to Kraken's good public relations.

Returning to the Bybit theft of $140 million incident, the real culprit should be the design flaw in the multi-signature contract of the Safe company, which allowed the hacker to break through the layers of defense and successfully attack the assets in the cold wallet, and the cold wallet + multi-signature configuration is already the highest security standard in the industry.

Fortunately, except for CZ's consistent "normal performance", the remaining exchanges, OTC, and large holders have publicly expressed their support, stabilizing the sentiment of the retail investors, who ultimately bore all the losses.

Ben Zhou Worries at Night, No FUD in the Group

Lessons from the past, the industry impact of Meng Tou Gou and FTX saved Bybit.

After the Meng Tou Gou theft, the entire crypto industry entered the first winter, when the main trading cryptocurrencies were BTC, far less than the later Altcoins and MEMEs, rising and falling together.

In 2022, FTX was not hacked, but scammed, with SBF scamming users and CZ scamming SBF, with Sun Yuchen's usual antics mixed in.

SBF claimed that user assets were not misappropriated, but the actual debt exceeding assets led to user withdrawal difficulties, FTX did not prohibit withdrawal suspension in a timely manner, which led to the crazy bank run by users, and the CZ who pointed out the emperor's new clothes first expressed support for SBF, even wanting to acquire FTX, and then said FTX was insolvent and gave up the acquisition.

In a flash, CZ's few tweets on Twitter completely destroyed FTX.

So when Ben Zhou saw CZ commenting that users should be prohibited from withdrawing first, he didn't know what to think, CZ might really think his suggestion was good, but Ben Zhou wouldn't think so.

And behind the scenes, the unusually united second and third-tier exchanges collectively took action to rescue Bybit, with the US regulators remaining silent, and the large holders and institutions not speaking, staging a night of saturation rescue.

Bitget supported 40,000 ETH, demonstrating the friendship between peers, as a struggling second-tier exchange, they took a rare stand together this time, of course, there are rumors that the two have common shareholders, even so, it is still worthy of praise.

However, the most critical Binance, so far, has not seen any substantive help beyond just expressing support, while OKX is just constantly Buidling its own wallet, reviewing the contracts over and over again.

The most surprising thing is that the US regulatory agencies, such as the SEC, have also become silent this time, normally they would not be so friendly, it seems that Ma Dufeng's rectification and Trump's crypto-friendly policies have indeed been implemented to the end, the general and the winner are now both winning scholars.

Calling back Meng Tou Gou and FTX, Bybit's best response this time is the personal effort of the boss, it seems that doing self-media really exercises people.

A Trader Who Doesn't Want to Be a KOL Is Not a Good Boss

The great advantage of the crypto industry is its flatness, both internally and externally, Binance used to fire employees who traded without reporting, which was a compliance move to deal with old rat cages, leading to missing the entire on-chain era now.

Bybit's flatness is to abandon the celebrity CEO and professional manager mechanism of Bitget, and the boss himself takes the stage as a net celebrity, of course, the behind-the-scenes big boss still maintains his usual low profile, but Ben Zhou often appears as an English KOL, which should be one of the best foreign public figures among Chinese exchanges, second only to CZ.

However, there are also pleasant surprises, as Ben Zhou's Kaito has risen rapidly in the rankings, surpassing Coinbase co-founder Armstrong. It is truly a case of the exchange's misfortune and Twitter's fortune, contributing a lot of Crypto traffic to Musk.

The emphasis on traffic is also a major plus for Bybit in this case. In fact, the first priority in crisis public relations is to remain calm and open, of course, provided that there is capital for calm handling. To begin with, we should thank the hackers, as the 4.2 billion USDT in the cold wallet was not stolen, because Tether will freeze it; secondly, we should thank SBF, as it was after the FTX incident that all major exchanges implemented the PoR asset reserve proof.

The rescue of Bybit also proves the effectiveness of the PoR mechanism, as major exchanges have indeed segregated their own assets and user assets. We may also need to thank Vitalik, as the rapid development of ZK technology is inseparable from him.

Within 48 hours of crisis management, Bybit has maintained market confidence in itself and ETH, but the problem has not been solved. Binance was fined $4.2 billion and is facing frequent accusations of being a "sister" coin, so Bybit will need to maintain its market position and regain the confidence of institutional clients, which may take years.

An old topic, the profit source of exchanges is the loss of user clients, and under models such as asset management and pledging, the profit of exchanges can come from the chain, which at least theoretically avoids the accusation of using client loss as a profit source.

But that was in the past. Before the huge financial losses, any means could appear. Now it remains to be seen whether Bybit's heart is stable and whether it is willing to spend another cycle of time to establish a normal revenue model.

Opportunity for DEX to Flip CEX?

In theory, when CEXs encounter crises, DEXs will see new traffic inflows, after all, "Not Your Keys, Not Your Coins" is still fresh in people's minds. But today, the problem is very complex. If it's the HODL crowd that self-custodies their cold wallets, then it's indeed safe.

For on-chain tools and trading products, only the OKX Web3 wallet is a non-custodial wallet, where the private key is the sole credential for accessing and controlling cryptocurrencies. Holding the private key means complete ownership of the assets in the wallet, and as long as the private key is not compromised, there will never be any problems, with security guaranteed by cryptography.

But for most trading products, custodial wallets are the norm, and the reason is not complex - higher efficiency and smoother user trading. Security and efficiency can never be achieved simultaneously.

Especially for trading tools that focus on multi-chain and multi-currency, as well as numerous TG Bots, they basically adopt the strategy of reducing security in exchange for CEX-like features. Even Hyperliquid once responded to the hacker targeting the general last year.

Exchanges can defend against 100 attacks, but hackers only need to succeed once. Defending against air raids, nine out of ten are in vain.

In the current compensation cases, Mentougou and FTX are both eligible for the compensation process, while it is more difficult for DEXs to recover stolen assets, such as the recent DEXX.

Worse still, all security cannot last forever, and Curve had fixed the contract, not expecting the programming language used to write the contract to have problems. In the end, they could only encourage users to migrate assets and rewrite the contract. Personally, I feel this is the safest approach for DEXs, but it still can't stop the "diligent" hackers.

Conclusion

Humans don't thank Luoji, and users are not just Bybit, it's just that they feel a sense of empathy. In the dark forest of the chain, adhering to social Darwinism for a long time, the theft from Bybit is social news, while the daily hacker attacks on retail investors are even more tragic, without even making the news. This is probably the reason why retail investors sympathize with Bybit.

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