Security in Crypto: Preventing Hacks and Rug Pulls in the DeFi Era

Today, the security in crypto has undoubtedly become a major concern. This is mainly because of the fact that billions in digital assets are lost to hacks, rug pulls, and other sophisticated attacks. With the rise of DeFi crypto trading, investors face growing cryptocurrency security issues. These issues range from phishing scams to insider rug pulls. So, an important question that one needs to answer currently is – What is the best security for cryptocurrency?

In the first half of 2025, almost USD 1.93 billion had been stolen through crypto-related crimes. This number could rise further if strong security measures are not implemented. Let’s explore the main types of security in crypto.

Complex Security Attacks in Crypto

The security in the crypto realm has changed dramatically. Online hackers are employing advanced strategies against DeFi exchanges and wallets. Beyond conventional smart contract bugs, online attackers are employing new ways to target systems and users.

Some of the common Cryptocurrency security issues in the DeFi era include:

• Smart Contract Exploits 

They refer to malicious attacks that are capable of taking advantage of the vulnerabilities in the code of smart contracts. Such types of attacks have the potential to cause unauthorized fund transfers and financial losses. Additionally, Smart Contract Exploits may also result in denial of service.  

• Rug Pull and Exit Scams 

Rug Pull and Exit Scams refer to common types of cryptocurrency investment fraud. In such scams, the project creators deceive investors so that they can steal their funds. Such fraudulent activities involve promoting promising projects, gathering investments, and then suddenly abandoning the projects. 

• Social Engineering attacks 

Social engineering attacks in crypto have been gaining momentum. Such attacks exploit human psychology instead of targeting technical vulnerabilities. Scammers can manipulate the emotions of investors, such as fear, urgency, and greed, to get them to give away sensitive information. 

• Cyberjacking 

Cyberjacking refers to a cyberattack where cybercriminals hijack the computing resources of the devices of their victims to mine cryptocurrency without their permission. In such types of online attacks, hackers mostly use cryptojacking code for generating and collecting valuable cryptocurrency without incurring any related costs.

• AI-driven Exploits 

In recent years, there has been a surge in AI-driven exploits. These AI-driven exploits threaten not just DeFi platforms but also erode investor trust in the entire crypto ecosystem. Some of the common examples include flash loan attacks and automated phishing. Although the emergence of Artificial Intelligence technology is a boon in the digital space, it is being misused by malicious actors for malicious purposes. 

Major Types of Security in Crypto

The importance of security in crypto cannot be overemphasized in the current times. Before answering the question – What is the best security for cryptocurrency? It is essential to be aware of the major types of cybersecurity in crypto. The chief security types can be categorized into different categories, such as technology measures, custodial security solutions, platform security, and user-focused best practices.

1. Technology Measures 

Technology-based security in crypto mainly focuses on safeguarding the blockchain infrastructure and smart contracts that power DeFi ecosystems. Currently, some of the most effective technology measures include auditing of smart contracts and multi-signature approvals. Similarly, formal verification is a robust safeguard mechanism to reduce cryptocurrency security issues.

• Smart contract audits 

The role of smart contract audit is crucial since it involves a thorough review of the code by security experts. This procedure helps identify vulnerabilities before a protocol goes live.

• Multi-signature approvals 

Such approvals are effective ways for strengthening the security in crypto transactions. It is a foolproof mechanism that can ensure that approval is taken from multiple individuals before the execution of a transaction.

• Formal verification 

Formal verification is the process of proving that a blockchain protocol or a smart contract behaves as it intends to behave. As it is a mathematical approach, it is proof-based. The deployment of such cybersecurity in crypto can ensure that smart contracts and cryptographic protocols are free from bugs.

2. Custodial Security Solutions 

While talking about security in the crypto space, one cannot omit custodial security solutions. They adopt a holistic approach for managing risks that arise in the crypto arena by combining physical security with cybersecurity. Hardware wallets, cold storage solutions, and multi-signature key sharing certainly act as today’s gold standard. 

• Hardware wallets 

Crypto users need to use hardware wallets to reduce their risk from cybercriminals and safeguard their digital assets. The best thing about these wallets is that they are cold or offline. They serve as one of the most effective ways of protecting oneself against cyberattacks.  

• Cold storage solutions 

Cold storage solutions refer to offline ways of keeping private keys. They eliminate the risk from malicious actors in the online setting. By opting for offline techniques, users can certainly minimize their exposure to cyberattacks.  

• Multi-signature key sharing 

Multi-signature key sharing is a unique method that distributes control relating to crypto wallets across diverse parties. It undoubtedly serves as a powerful defence mechanism that makes it difficult for cybercriminals and online hackers to succeed in their malicious intentions.  

3. Platform Security 

Platform security looks beyond code and wallet aspects of the crypto space. The fundamental purpose of this type of security in crypto is to boost its overall resilience. Some of the common security measures that exist include regulatory compliance, exchange-level security protocols, and KYC/ AML integration.

• Regulatory compliance 

As the crypto landscape is evolving at a rapid pace, there is a need to prioritize regulatory compliance. True resilience requires solid compliance so that cybercriminals will have no scope to engage in hacking or similar types of attacks. It is key to lay emphasis on data protection laws, auditing, and reporting. 

• Exchange-level security protocols 

Security protocols need to be deployed at the exchange level so that a secure environment can be developed. To promote safe trading, you must look beyond the security of individual wallets. It is a must to deploy infrastructure-wide defences that can safeguard against hacking. Common protocols that you can find today are the use of multi-signature wallets and formal verification of smart contracts. 

• Focus on KYC/AML 

As crypto adoption is rising, there is a need to fuse practices such as Know Your Customer and anti-money laundering. Proper checks and monitoring are key so that legitimate investors can be safeguarded. Such practices can help identify suspicious individuals in a prompt way within the crypto ecosystem.  

4. User-focused Best Practices

The most advanced systems may fail if users fail to understand the importance of security. Therefore, there is a need to focus on user-focused best practices. Such practices remain an integral part of security in crypto. Investors must revoke unnecessary token approvals. They also need to enable multi-factor authentication and store their confidential information offline.

• Revoking unnecessary token approvals 

Users need to make sure that they do not grant their smart contract frequent permission to spend tokens on their behalf.  You can do so by regularly revoking unnecessary token approvals. It can act as an additional layer of security for you.  

• Multi-factor authentication 

Another best practice undoubtedly revolves around the use of multi-factor authentication. It is an effective defence mechanism against unauthorized parties. 

• Using cold storage 

Cold storage is a reliable security approach for cryptocurrency. You need to keep your private keys offline securely so that they remain disconnected from the internet. 

Final Words

Cryptocurrency security issues are a major concern currently. As the adoption of crypto is on the rise, there is a need to identify solid security measures that can help curb security risks and threats. Some of the common risks are smart contract exploits, rug pulls and exit scams, social engineering attacks, and many more.

Several types of security measures in crypto have been identified. These measures are technology measures, custodial security solutions, platform security, and user-focused best practices, so that proper preparedness in terms of security exists.