The recent security breach at Bybit has sent shockwaves through the crypto industry, raising serious questions about the safety of multi-sig cold storage solutions. This incident underscores the need for more sophisticated security measures as cyber threats continue to evolve. Experts, including Ledger CEO Pascal Gauthier, Fireblocks representatives, and Binance co-founder Changpeng Zhao (CZ), have weighed in on what went wrong and how exchanges can better safeguard digital assets.

How Bybit Responded to the Breach

Bybit CEO Ben Zhou acted swiftly, halting withdrawals and launching a comprehensive investigation with cybersecurity experts. His decisive crisis management helped contain the damage and prevent further losses. This response serves as a textbook example of how crypto exchanges should react to security breaches, prioritizing user protection and transparency.

The Rise of Sophisticated Crypto Hacks

This latest breach highlights a concerning trend: hackers are increasingly targeting multi-sig cold storage solutions. CZ pointed out that affected exchanges—including WazirX and Phemex—relied on different multi-sig providers, proving that these attacks are not limited to a single vendor but rather indicate a systemic security issue across the industry.

Security Lessons from the Experts

1. Enhance Transaction Transparency and Reduce Blind Signing

One of the biggest risks in crypto security is blind signing—where users and platforms approve transactions without fully understanding what they’re authorizing. Ledger CEO Pascal Gauthier emphasized that these types of attacks could be mitigated with Clear Signing, a method that ensures users can verify transaction details before approving them.

“These hacks are preventable, and enterprise-grade security is necessary for large transactions. As cryptocurrency becomes more widely adopted, scams and phishing attacks also rise. Clear Signing is the only way to securely authorize a transaction—that’s why Ledger is implementing Clear Signing for the entire ecosystem, requiring support from partners to properly integrate,” said Gauthier.

Fireblocks also supports enhanced transaction visibility through its DeFi threat detection and real-time monitoring, helping institutions identify and stop suspicious transaction patterns before they are executed.

2. Rethink Multi-Sig and Adopt Distributed MPC Wallets

Multi-sig solutions, once considered a gold standard in crypto security, are increasingly being exploited. Both CZ and Fireblocks have highlighted their vulnerabilities, advocating for a transition to Distributed Multi-Party Computation (MPC) wallets. Unlike traditional multi-sig setups, MPC wallets distribute key fragments across multiple parties, eliminating single points of failure and reducing the risk of compromise.

The Future of Crypto Security

As attacks become more sophisticated, the crypto industry must proactively adopt advanced security measures to protect user assets. Bybit’s breach serves as a stark reminder that traditional multi-sig security solutions may no longer be sufficient. Moving forward, exchanges must prioritize technologies like Clear Signing and Distributed MPC wallets to enhance security and maintain trust in the evolving digital asset space.

With cybersecurity threats on the rise, the industry’s ability to adapt will determine its long-term resilience. By learning from incidents like this, crypto exchanges can better prepare for the challenges ahead and strengthen their defenses against future attacks.