A recent major cryptocurrency heist has once again cast a harsh light on the security vulnerabilities inherent in centralized crypto exchanges, driving increased interest in decentralized solutions. The $1.4 billion ETH theft from Bybit, attributed to North Korea’s Lazarus Group, is the largest crypto theft on record. This event comes amidst a period of optimism for the digital finance sector, following the installation of a new U.S. president and the administration’s commitment to making the country a global leader in the industry. The hack is likely to undermine user confidence in cryptocurrencies and will encourage further scrutiny from policymakers looking to regulate the sector.
The Bybit Hack: A Case of Human Error
The Bybit hack, which followed a trend where $2.36 billion was lost in 2024 across 760 security incidents, according to a CertiK’s Hack3d report, was caused by human error rather than a problem with blockchain technology. The breach occurred through a sophisticated phishing attack, deceiving the human signing officers who authorized the fraudulent transfer of cryptocurrency using a “multisig wallets” function. Cybercriminals are increasingly targeting the human element – like the FTX bankruptcy, which was a result of human fraud, and weaknesses of new digital technology – highlighting the risks inherent in the centralised security systems of platforms.
The Rise of DePIN: A Solution to Centralized Security Threats
The good news is that Decentralized Physical Infrastructure Networks (DePINs) are vastly improved solutions to centralized cybersecurity threats by distributing trust and validation. Valued at $29 billion with a daily trading volume averaging $2.18 billion, DePINs are poised for substantial growth in the digital finance sector of Web3. DePINs are transforming a range of industries reliant on the centralised governance and management of physical infrastructure. The market as a whole, including utilities and digital assets, is expected to experience significant growth, and companies like Franklin Templeton have made bold predictions about this area.
David Carvalho, founder and CEO of Naoris Protocol, believes DePINs could have prevented the Bybit hack. He stated, “No system is infallible, but decentralized validator nodes in DePINs automatically detect abnormal user behaviours or compromised devices and isolate threats immediately while continuously verifying transaction interfaces against cryptographically secure, on-chain versions. “The distributed code attestation at DePINs ensures only verified smart contracts execute which stops unauthorized transactions and hackers.”
DePINs: Opportunities and Challenges
In its State of DePIN 2024 report, crypto analytics and research firm Messari estimates that 13 million devices globally contribute to DePINs every day, and 20 DePIN projects have 100,000-plus active nodes, with five having over a million. The report estimates that the addressable market for DePIN is $2.2 trillion and could reach $3.5 trillion by 2028. Research for crypto exchange Bitrue estimates more than $246 million was invested by venture capital firms in 70 DePIN projects last year.
One of the best-known DePIN projects, Helium, is estimated to have attracted $1 billion in investment for its decentralized wireless network. However, DePIN faces the challenge of needing not only robust technology, but also real world users adopting it to be successful.
The Web3 Opportunity for DePIN
The development of Web3 focuses on decentralization and empowering individuals. Alireza Ghods, the CEO and co-founder of NATIX, emphasizes that the widespread adoption of both DePIN and Web3 relies on making existing technologies and solutions better. The current environment of cyberattacks, data breaches and the rise of AI and the Metaverse are causing concern for IT professionals who expect a rise in costs and are looking for solutions.
New research with developers found that 95 percent have seen a rise in malware attacks over the past two years. In the face of these rising threats, 81 percent of developers believe DePIN is the key to cyber security, with 71% percent believing it will help cut costs.
Carvalho comments, “Centralized security models are obsolete. By enabling continuous, decentralized security validation, DePINs eliminate single points of failure, significantly reducing risk and restoring trust in the digital world. DePINs not only reduce reliance on centralized entities but also foster community participation, creating new economic incentives for contributors. As quantum computing threats emerge, DePINs will play a crucial role in addressing cybersecurity challenges.”
Naoris Protocol’s study also reveals positive attitudes about real-world DePIN applications, with 96 percent of the IT directors surveyed saying their organization is involved in DePIN projects now. As DePIN continues to gain momentum, the technology is taking center stage as an essential component of cyber security.
