Behind the 29 million BTC theft by the South Korean prosecution: Is frequent crypto theft the original sin of decentralization or the industry's growing pains?
The South Korean prosecution has taken a huge fall! 320 BTC, equivalent to 29 million dollars in crypto assets, fell into the trap of phishing during the asset handover stage. Five investigators are under internal review, and the official stance insists it was the work of external hackers, yet it does not quell the doubts within the industry. However, this incident is hardly new in the crypto world - in 2025, the scale of global crypto asset theft soared to 3.4 billion dollars, with an average recovery rate of stolen assets at only 3.7%, which is far below the 42% recovery rate of traditional financial assets.
Technological iterations are accelerating, with security solutions for wallets, custody, and protocols continuously updating. Why, then, does crypto theft persist? Some say this is an inherent flaw of decentralization, where the logic of "private keys equal ownership" shifts all risks onto the holder, and the irreversible, anonymous characteristics give hackers a free pass. Others argue that this is merely a phase of pain in industry development, a natural result of technology running too fast while regulation fails to keep up, and the slow filling of ecological gaps.
Today, we will analyze the underlying contradictions behind the frequent occurrence of crypto theft from three dimensions: the essence of technology, regulatory logic, and ecological structure. We will discuss the difficulties in implementing various solutions and also predict the evolution direction of crypto security in the next five years— the answer is clear: the core issue of crypto theft is never decentralization itself but the imbalance between "scale expansion and security construction, and the disconnect between technological innovation and rule establishment" in the early stages of industry development. This content is a hardcore practical analysis within the industry, where projects, institutions, and ordinary users can all find the most pragmatic safety insights.
Three fundamental contradictions: the root of crypto theft lies in the triple imbalance of technology, regulation, and ecology.
The cases of stolen crypto assets are diverse, including phishing, smart contract vulnerabilities, cross-chain bridge attacks, and private key leaks... Although they seem to be different security issues, they are actually rooted in three unavoidable underlying contradictions. These contradictions intertwine to make crypto security the "Achilles' heel" of the industry, and all of this starts with the core characteristics of crypto technology.
Contradiction 1: The "double-edged sword" of technical characteristics— the essence of decentralization amplifies the irreversibility of risks.
Everyone in the industry understands that the core value of crypto assets lies in decentralization, irreversibility, and anonymity. However, while these characteristics bestow the assets with free circulation attributes, they fundamentally determine the logic that "theft equals loss"— this is the most essential difference from traditional finance.
From a technical perspective, Bitcoin's UTXO model and Ethereum's account model both adhere to the consensus mechanism that "once a transaction is confirmed on-chain, it is irreversible and unalterable." In traditional finance, if a bank card is fraudulently used, one can contact the bank to freeze the transaction and recover funds; even the central bank's clearing system can directly reverse unauthorized transfers. However, the transaction records of crypto assets are etched on the blockchain, witnessed by global nodes. Even stolen assets, as long as hackers complete the transfer and mixing, no institution can forcibly freeze or recover them. Of the $3.4 billion in crypto assets stolen globally in 2025, less than $130 million can be recovered through on-chain traceability. This is a hard constraint of technical characteristics.
The more deadly issue is the "washing trap" created by anonymity. The addresses of crypto transactions are completely disconnected from real identities. After hackers steal assets, they can simply use mixing services, Monero/ZenCash and other privacy coins to split the assets and transfer them to multiple anonymous wallets, making on-chain tracing extremely difficult. Currently, there are fewer than ten institutions globally with complete on-chain traceability capabilities, most of which are concentrated in leading exchanges and regulatory agencies in Europe and America. Developing countries do not even have basic traceability technology, and solving cases relies largely on luck.
Moreover, the logic of "private keys equal ownership" directly transfers all security responsibilities to the holder— whether individual users or institutions like the Korean prosecution, as long as the private key is leaked or falls victim to phishing, it means total loss of assets. In traditional finance, fund safety is backed by layers of banks and insurance companies, whereas the crypto world has a zero tolerance for error. This is not a flaw of technology but rather the fact that we have yet to establish a security protection system suitable for this technological characteristic.
Contradiction 2: The "lagging nature" of the regulatory system—global rules are fragmented, making the cost of violations for hackers absurdly low.
If the characteristics of technology are the "innate conditions," then the lag in regulation is the "acquired indulgence." The cross-border nature of crypto assets and the fragmented regulatory rules of various countries create a sharp contradiction, ultimately leading to "hackers having space to commit crimes, but lacking the basis for accountability." The profit-cost ratio of crime is shockingly high.
First, there are numerous regulatory blank spots. Cross-border theft lacks unified jurisdiction; hackers set up phishing websites and launch attacks in countries without extradition treaties, and the regulatory agencies in the victim's country have no authority to hold them accountable; thefts in the DeFi sector accounted for 41% by 2025, but no country has yet clarified the security responsibilities of DeFi protocols— if a protocol has vulnerabilities leading to asset theft, is it the responsibility of the development team, the platform, or the user? The answer is always ambiguous; as a core infrastructure of the crypto ecosystem, cross-chain bridges have no global unified security standards; by 2025, the average loss from theft due to cross-chain bridge vulnerabilities is 2.3 times that of exchanges, yet no institution mandates a security audit.
Secondly, the low cost of violating regulations has lost its restraining effect. Currently, the global resolution rate for crypto theft cases is less than 8%. Even if a case is fortuitously solved, the penalties faced by hackers are laughably light— the maximum penalty for crypto theft under U.S. federal law is 10 years in prison plus asset forfeiture, while the profits from a single theft case often exceed ten million dollars, resulting in a profit-cost ratio as high as 100:1. This "low-risk, high-return" situation directly stimulates hackers' motives for committing crimes.
More critically, the existence of regulatory arbitrage. The EU's MiCA regulation has long required crypto exchanges to mandatorily purchase theft insurance for no less than 50% of managed assets and has clear requirements for the security standards of custodial institutions; however, some developing countries have yet to introduce any regulatory policies for crypto, becoming a "safe haven" for hackers. Transferred assets stolen to these regions basically mean they disappear without a trace.
Contradiction 3: The "imbalance" in ecological structure—security investment cannot keep pace with industry growth, and infrastructure is all shortfalls.
By 2025, the global crypto industry's financing scale is expected to reach $178 billion, which seems prosperous, but behind it lies a serious ecological imbalance of "heavy marketing, light security." The frequent occurrence of crypto theft is largely the bitter fruit of the industry itself's "heavy speed, light foundation," reflected in three aspects: funding, infrastructure, and user education.
Firstly, investment in security is severely insufficient. By 2025, only 4.2% of the funds flowing into the crypto industry will be allocated to security, while most project teams spend over 90% of their budget on marketing promotion and technical development, ignoring smart contract audits and the establishment of security risk control systems. According to industry statistics, about 60% of niche token projects have never undergone smart contract audits, with a vulnerability rate as high as 38%, which is viewed as a "defenseless treasure trove" by hackers.
Secondly, the "pseudo-decentralization" shortcomings of infrastructure. Many crypto infrastructure entities loudly proclaim decentralization while the core components remain under the control of centralized entities: some cross-chain bridges have relay nodes operated by a single entity; if hackers breach this node, they can control the entire cross-chain bridge; in the institutional custody field, only 15% of institutions use a combination of MPC (secure multi-party computation) + offline cold wallets, while the rest still rely on the "single private key + online storage" model. As long as the server is breached, the private key will be directly leaked; the theft in this case by the Korean prosecution essentially resulted from a vulnerability in centralized management during the offline handover process.
Thirdly, the lack of user education is the biggest entry loophole. Among global crypto users, only 23% use hardware wallets, 37% store their mnemonic phrases in easily leaked places like photo albums or cloud storage, and as many as 62% admit they are "unaware of common phishing tactics." Statistics from 2025 show that 72% of crypto theft cases are directly related to user operational errors— phishing links, fake wallet apps, mnemonic leaks— these basic attack methods keep succeeding, highlighting the industry's significant shortfall in user security education.
The predicament of implementing solutions: technology can solve problems, but cannot address cost and coordination issues.
In fact, the crypto industry has never lacked security solutions: MPC custody, hardware wallets, on-chain traceability, automated risk control for smart contracts... These technologies can effectively reduce the risk of theft, but why can they never be widely popularized? The answer is very pragmatic: the implementation of all solutions cannot avoid the three major challenges of cost, regulatory coordination, and industry self-discipline. Technology can solve technical problems but cannot resolve issues of human nature and interests.
Technical solutions: effective but expensive; small and medium entities cannot afford them.
The most mature MPC custody solutions can reduce the risk of private key leakage by 90%, but the deployment cost of this solution is three times that of traditional custody solutions. Small and medium crypto institutions and local regulatory agencies simply cannot afford it— the Korean prosecution, as a local judicial institution, clearly will not invest heavily to build top-tier custody security systems for managing a small amount of crypto assets.
Hardware wallets are the most effective security tools for individual users, with prices already down to around $50, but global penetration remains below 12%. The reason is simple: ordinary users prefer to use "free online wallets," feeling that hardware wallets are complicated to operate and cumbersome to carry. They would rather bear safety risks than pay for security. This "heavy convenience, light security" mindset among users makes the popularization of hardware wallets difficult.
Even on-chain traceability technology, while it can track the flow of stolen assets, the cost of traceability services can reach tens of thousands of dollars per case, which ordinary stolen users cannot afford. Meanwhile, the traceability needs of institutions heavily rely on a few leading institutions, creating a "centralized monopoly of traceability capabilities," further limiting the technology's popularization.
Regulatory solutions: global coordination is difficult, and fragmented rules are hard to break.
To address the issue of cross-border crypto theft, the G20 established the Crypto Assets Working Group three years ago, attempting to formulate globally unified crypto regulatory standards. However, to this day, all parties are still at a stalemate on key issues: developed countries want to include decentralized projects under strict regulation, while developing countries worry that excessive regulation stifles industry innovation; European and American countries advocate for the "territorial jurisdiction principle" regarding cross-border theft, while emerging markets demand the "personal jurisdiction principle."
The lack of uniform regulatory rules renders the regulatory policies of any single country virtually ineffective: no matter how strict the EU's MiCA regulation is, hackers can evade EU regulatory constraints by committing crimes in Southeast Asia, Africa, or other unregulated areas; no matter how severe the penalties for crypto theft are in the United States, it cannot extradite hackers in countries without extradition treaties. This global regulatory coordination resistance prevents the formation of an effective regulatory system for crypto security.
Industry self-discipline: There are alliances but no constraints, with small and medium entities falling through the cracks.
Leading crypto platforms like Coinbase and Binance have long established a "Crypto Security Alliance" to share hackers' address databases and jointly combat crypto theft. However, the biggest problem with this self-regulatory system is the lack of mandatory enforcement. Leading platforms will adhere to the alliance's rules and blacklist and freeze hacker addresses, but small and medium platforms and decentralized exchanges often ignore hacker addresses for the sake of traffic, even becoming channels for hackers to launder assets.
More critically, industry self-discipline cannot cover all ecological entities: niche token projects and individual DApp developers are outside any alliance, neither conducting security audits nor adhering to security rules, becoming a "disaster zone for security vulnerabilities" in the crypto ecosystem. The existence of these entities also leaves a gap in the security defense line of the entire ecosystem.
A few successful cases: the core of security is the threefold implementation of "technology + rules + execution."
Of course, some regions and platforms have found solutions to crypto security. These successful cases also point the way for the industry.
The "crypto custody security framework" launched by Singapore's MAS is regarded as a security model for institutional custody: it requires all crypto custody institutions to meet four rigid conditions—"private key split storage (at least 3 copies, kept by different teams) + real-time on-chain auditing + off-site disaster backup + theft insurance of no less than 50% of managed assets." After this framework was implemented, the theft rate of crypto assets in Singapore dropped by 67%, making it one of the safest regions for crypto custody globally.
A leading DeFi protocol has solved the theft problem of smart contracts from a technical perspective: it introduced an "automated risk control system for smart contracts" that automatically triggers a 24-hour transaction cooling-off period when it detects risk behaviors such as unusually large transfers or transfers from unknown addresses. During this period, the platform conducts manual reviews of transactions. After this system was launched, it successfully intercepted three potential large theft cases, reducing the risk of protocol vulnerabilities being exploited to nearly zero.
These cases prove that the security issues of crypto assets can never be solved by a single technology; rather, they require a combination of the implementation of technological solutions, strict regulatory constraints, and rigorous execution.
Predictions for crypto security trends from 2026 to 2030: The pain will eventually pass, and security will become a core competitiveness.
Standing at the 2026 node, we can clearly see that the security construction of the crypto industry is approaching a turning point. In the next five years, as technology matures, regulations improve, and ecology balances, the theft rate of crypto assets will significantly decrease, and security will gradually approach or even exceed that of traditional financial assets. All of this will unfold around three major trends:
Trend 1: The "scaled popularization" of security technology, reduced costs, and lower thresholds.
In the next five years, crypto security technology will experience large-scale popularization, mainly due to the significant reduction in costs brought about by technological maturity. The deployment cost of MPC custody solutions will decrease by 50%, making it a conventional solution affordable for small and medium-sized institutions; the operation of hardware wallets will be further simplified, with prices expected to drop below $20, and global penetration rates will rise to over 30%; smart contract audits will become a mandatory requirement for project launches. The popularization of automated audit tools will reduce audit costs by 70%, allowing 60% of niche projects to afford audit fees.
Industry data predicts that by 2030, the global theft rate of crypto assets will drop from 1.5% in 2025 to 0.3%, with the recovery rate increasing to over 15%. The security protection system for crypto assets will tend to improve.
Trend 2: Regulation shifting from fragmentation to regional unity, with cross-border cooperation becoming mainstream.
The core trend of global crypto regulation will be "regional unity first, global coordination to follow." The EU's MiCA regulation, Singapore's MAS framework, and Hong Kong's new regulations on crypto assets will be adopted by more countries and regions, forming a unified standard for crypto security across the EU, Asia-Pacific, and North America.
In terms of cross-border regulation, the G20 Crypto Assets Working Group will gradually reach a consensus and establish a joint investigation mechanism for cross-border crypto theft: regulatory agencies from various countries will share hacker traceability data and sign extradition agreements for crypto theft, holding cross-border hackers jointly accountable. At that time, the cost of violating crypto theft regulations will significantly increase, and the profit-cost ratio of crime will drop below 20:1, fundamentally curbing the motives for hacker crimes.
Trend 3: The rise of "security as a service (SaaS)" in the ecosystem, making security a universal capability.
In the next five years, a number of specialized third-party security service providers will emerge in the crypto ecosystem. "Security as a Service (SaaS)" will become the industry standard. Leading security institutions like CertiK and OpenZeppelin will launch standardized security solutions— small and medium project parties will not need to build their own security teams, but can access third-party risk control systems, audit tools, and on-chain traceability services through APIs, thereby obtaining the same security protection capabilities as leading projects.
This model will completely solve the security accessibility problem in the crypto ecosystem, allowing niche projects and small and medium institutions to enjoy top-tier security services, fundamentally filling the security gaps in the ecosystem and ensuring that crypto security is no longer an "exclusive right" for leading entities.
Industry insight: Security is not an add-on, but the survival baseline of the crypto industry.
From the 29 million stolen by the Korean prosecution to the global theft scale of 3.4 billion, the crypto industry must recognize a fact: security is not an addition to technology, but the industry's core competitiveness and survival baseline. Every entity in the ecosystem has clear security requirements; this is not a choice, but a rule that must be followed:
• For project parties: smart contract audits, the establishment of security risk control systems, and compliance filings will become "hard indicators" for project financing and launch. Projects without security guarantees will ultimately be eliminated by the market.
• For institutions: compliant custody, risk reserves (recommended to be no less than 10% of managed assets), and theft insurance are the three bottom lines for institutional operations. Especially for special entities like regulatory and judicial institutions, they must establish security management systems that adapt to the characteristics of crypto assets and cannot treat crypto assets with traditional asset management thinking.
• For individual users: "hardware wallet + offline backup mnemonic + refuse unknown links/fake apps + do not participate in high-risk unaudited projects", this twenty-eight-character guideline is the basic literacy for protecting asset security. In the world of cryptocurrency, one's safety can only rely on oneself.
Decentralization and security have never been opposing forces.
Returning to the initial question: Is the frequent theft of crypto assets an inevitable cost of decentralization? The answer is no.
The core of decentralization is "the ownership of assets belongs to users, with no centralized institutions in control," while the core of security is "protecting users' ownership from infringement through the construction of technology, rules, and ecology." The two have never been opposing forces but rather complement each other. The theft of the Korean prosecution and various private key leak cases are essentially a mismatch between centralized management methods and the decentralized nature of assets, rather than an issue with decentralization itself; smart contract vulnerabilities and cross-chain bridge attacks are due to negligence in technological development, not flaws in decentralized technology.
Frequent crypto thefts are merely a phase of pain in the early stages of industry development—when the speed of industry expansion exceeds the pace of security construction, when the pace of technological innovation outstrips the establishment of regulatory rules, when the prosperity of the ecosystem obscures the shortcomings of infrastructure, the outbreak of theft issues becomes inevitable. However, as the industry matures, this pain will eventually pass. Decentralized crypto assets will ultimately achieve true security and freedom under the triple guarantees of technology, regulation, and ecology.