Security breaches represent one of the most significant risks prevalent in the cryptocurrency industry today. While a small number of projects manage to recover after experiencing an attack, the vast majority do not. Mitchell Amador, CEO of the Web3 security firm Immunefi, has stated that nearly four out of every five projects subjected to major hacks never achieve full recovery. The repercussions extend far beyond the immediate financial losses, significantly damaging trust, disrupting daily operations, and jeopardizing the long-term viability of these ventures.
Poor Incident Response Exacerbates Damage from Crypto Hacks
When a security exploit is discovered, many cryptocurrency projects rapidly descend into a state of chaos. Amador has observed that most teams are not fully aware of their vulnerability until an incident occurs. When a serious attack takes place, teams are often unprepared and frequently resort to freezing their systems. In the absence of a clearly defined response plan, project teams delay necessary actions, inadvertently providing attackers with more time to inflict further damage.
Furthermore, the fear of reputational damage can deter some teams from pausing smart contracts, even in situations where such a measure could mitigate losses. Amador emphasizes that the primary reason most projects fail after hacks is not the amount of money lost, but rather the breakdown of trust and operational integrity during the incident response phase. Once trust has been eroded, regaining it proves to be an exceptionally difficult task.
Human Error Identified as the Foremost Security Risk in Crypto
Trust is the most delicate element within the cryptocurrency ecosystem. Alex Katz, CEO and co-founder of the Web3 security firm Kerberus, notes that even after technical issues are resolved, the damage from a security breach often has lasting effects. User bases diminish, liquidity dries up, and reputations rarely recover fully. For a multitude of projects, a significant hack serves as a harbinger of their eventual demise.
Katz has explained that the nature of crypto attacks is also evolving. While smart contract vulnerabilities were historically the cause of most hacks, human error has now emerged as the most significant weakness. A substantial portion of losses occurs when users inadvertently approve malicious transactions, visit fraudulent websites, or inadvertently expose their private keys. This was exemplified earlier this month when a cryptocurrency user lost over $282 million in Bitcoin (BTC) and Litecoin (LTC). The perpetrator reportedly posed as customer support and successfully deceived the victim into divulging a hardware wallet recovery phrase.
Crypto Hacks See a Surge in 2025, Resulting in $3.4 Billion in Losses
The year 2025 witnessed a sharp increase in cryptocurrency hacks, with total losses escalating to $3.4 billion, marking the highest figures recorded since 2022. By early December of that year, just three major incidents, including the significant $1.4 billion Bybit breach, accounted for more than two-thirds of the total losses. A considerable number of these attacks did not target smart contracts directly but instead exploited operational vulnerabilities. The advancement of artificial intelligence (AI) has also contributed to the effectiveness of social engineering scams. Attackers are now capable of disseminating thousands of highly convincing phishing messages daily, thereby substantially increasing their success rates.
Despite these challenges, experts observe signs of improvement. The security of smart contracts is gradually enhancing as developers adopt more robust coding standards, undergo more rigorous audits, and utilize increasingly sophisticated tools. Industry experts anticipate that 2026 will be a particularly strong year for security advancements, with the wider adoption of on-chain monitoring, security firewalls, and real-time threat detection systems becoming more commonplace. While hacks may persist, the development of stronger defensive measures and the implementation of faster response protocols are expected to be the decisive factors in determining which projects manage to survive.