While massive, global cyber theft and data breaches (as well as large-scale geopolitical cyber attacks) may capture the headlines, there are many other issues surrounding the future of cryptocurrency.  The fraud and cybersecurity activity is necessary creative destruction in the cryptocurrency marketplace.  OODA CEO Matt Devost captured the current climate in the crypto market over the course of many OODA Network conversations this year and last, noting that:

“We needed to wash all the fluff out of the system. And every week we are seeing some sort of mass destruction of a major player in that space.  In the cryptocurrency and Web3 areas right now, there is such a flow of ideas, money, and associated fraud  – what we are seeing right now is the ‘house burning down.’  It does not mean that we can’t rebuild some of those essential technologies on top of the foundation, which is blockchain.

Web3 and cryptocurrency projects experienced a mass acceleration in 2021 and that continued in 2022.  Whether it is a stablecoin or whether it’s one of these blockchain facilitators or cross-chain facilitators.  There’s just a tremendous amount of activity there.  However, many of these initiatives will have consequential cybersecurity issues in 2022 that impacted public adoption and invite increased regulatory pressure. While Bitcoin, Ethereum, and other technologies allow for true decentralization, there is a middleware ecosystem emerging in the form of marketplaces and exchanges that are based on Web2 technologies that are being deployed without proper consideration for cybersecurity best practices.”

Governmental regulation now looms large over the entire innovation ecosystem that is bitcoin, crypto, digital currency, and, by extension, blockchain technologies.  For example, many governments –  and the U.S. will follow the lead – will not allow the transfer of bitcoin or digital currencies unless the identity of the recipient wallet is known.  This policy has come to be known as Know Your Customer (KVC) verification on anonymous crypto transactions and has the potential to break the anonymity-based model for much of the ecosystem. 

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