what purpose would a token serve?
We have always focused on delivering value to our users rather than creating a token for the sake of it. Our priority is to provide a robust trading platform and excellent customer service. If we were to launch a token, it would have to make sense in terms of adding value to our ecosystem and not just be a means to raise funds.
Moreover, the market is already saturated with tokens, and many of them do not hold any real value. We prefer to remain cautious and strategic rather than follow trends that may not align with our long-term vision.
In summary, we have never considered launching a token because we believe our efforts are better spent on enhancing our platform and services, ensuring that we meet the needs of our users effectively.What is the need to issue tokens? Generally, tokens are issued to attract investors or to build a complete ecosystem that entices users to join. However, Bybit has never attempted to build its own ecosystem in isolation.
We have always viewed ourselves as part of a larger ecosystem rather than as isolated entities. Our business model has been closely aligned with influencers and KOLs from the very beginning, becoming a part of their ecosystems. When we launched spot trading, we chose to collaborate with existing ecosystems like Solana and Ton, rather than attempting to create a competing system. We found that this model avoids potential conflicts of interest. In contrast, many exchanges, due to their own ecosystems, not only have to compete with other exchanges but also with ecosystems like Solana or other blockchain projects, ultimately leading to fewer opportunities for collaboration.
I believe that building your own ecosystem is only feasible when you are the absolute market leader. If you have sufficient market share and resources, you can indeed expand your suite of services through an ecosystem. But Bybit has never been the market leader; we are more like a “dark horse.” Therefore, we have never had the conditions to attempt to issue tokens or build an ecosystem. Ultimately, we chose to focus on our core business without launching tokens.
Kevin:
So, if the situation this weekend had been different, and Bybit had its own token, would there have been any differences?
Ben:
I don’t think there would be much of a difference. Frankly speaking, I feel that the existence of a token has no direct relation to this incident. If we had a token, what kind of impact do you think it would have?
Kevin:
Perhaps the market would start shorting the token, leading to a rapid decline in its price, which could further worsen market sentiment and trigger more panic. In that case, you might face another crisis.
How to rebuild user trust after a crisis?
Kevin:
I heard that you experienced about $4 billion in withdrawals overnight. Facing such pressure, how did you rebound and rebuild user trust?
Ben:
We have already begun to gradually restore trust. I believe the key lies in how to respond to a crisis. Transparency and timely communication are central to rebuilding trust, while maintaining a professional demeanor is essential for earning community respect. During this incident, despite facing tremendous challenges, Bybit demonstrated a high level of professionalism, which has been widely recognized. Many users even praised us during the crisis, believing that our performance was trustworthy. This trust comes not only from users but has also been acknowledged by global regulators.
We are applying for licenses through multiple regulatory bodies. In the past few days, many people have reached out to us saying, “Hey, I think Bybit is doing very well.” They even expressed greater trust in the future, believing that if we encounter any events or issues again, we would handle them in the same way.
So from this perspective, this is actually the best way to show the world how we operate and our philosophy.
Cryptocurrency wallet security: Learning from lessons
Kevin:
What improvements will Bybit make in risk management in the future? I’m also pondering a question: is it reasonable to store $1.5 billion in one wallet? How should we allocate funds? What amount is considered excessive, and what is insufficient?
Ben:
This is a very important question and has sparked much discussion over the past few days. Our security team is actively researching new solutions to ensure that similar risks do not occur again. In the future, we plan to optimize our wallet system, such as reducing risk through wallet segmentation. This way, even if one wallet is attacked, it will not have a significant impact on the overall funds.
We are also discussing which more advanced technological measures to adopt. I believe that Ethereum’s developments in this area are worth referencing, such as smart contract wallets. These wallets can enhance security through multi-signature and permission management, and can even avoid the risks associated with online signing. Some of our current wallets rely on online signing, which, while convenient, cannot be considered true cold wallets as they require browser operations. In contrast, most of our Bitcoin is stored in cold wallets that are completely offline, where all signing and transaction operations are conducted in an offline environment. Unless someone physically breaches the system, it is nearly impossible to compromise this storage method.
Therefore, I believe we will design something that focuses on areas that are physically impenetrable. Yes, I think these are some of our key concerns.
The future trend of cryptocurrency self-custody
Kevin:
This brings to mind a core issue in the cryptocurrency field—self-custody. In this industry, we often say, “Not your key, not your coin,” which is typically a reminder to individual users, advising them not to store their assets on exchanges but to opt for self-custody. However, when similar security incidents occur, this advice seems to make little difference. Your security measures are far more complex than the self-custody methods of ordinary users, yet they can still fall victim to hacking.
Does this mean that both individuals and institutions may face security risks? In your view, what is the future development direction of self-custody?
Ben:
This is a great question. We do face a significant challenge, as we are a very obvious target for attacks. For hackers, large exchanges like Bybit are one of their preferred targets. One important lesson we learned from this incident is that our scale even exceeds that of some security service providers we rely on. Therefore, logically, attacking us makes “sense” to hackers. While I am not saying this incident occurred in this way, it is something we need to be vigilant about. No matter how strict our security measures are, as a large target, we always face higher risks. Hence, I believe relying on third-party solutions is not the optimal choice.
For regular users, the concept of “Not your key, not your coin” is correct, but I believe we also need to emphasize “diversifying risk.” When your assets reach a certain scale, you become a potential target for attacks, so it is crucial to diversify storage locations for your assets. For institutions like Bybit, we actually need to apply the concept of “self-custody” to ourselves, using completely self-developed technological solutions instead of relying on third parties.
Responsibility is the biggest lesson we learned from this incident. Although we invested substantial resources to ensure security, problems still arose. This indicates that we had deficiencies in certain decisions, such as choosing a solution that relied on browser signing, which is evidently not secure enough. In the future, we need to focus more on developing and using autonomous security technologies rather than relying on industry standards. While industry standards provide some assurance, they are not foolproof. The biggest problem with relying on third parties is that you transfer part of the responsibility to them, which may lead to your own lack of caution on critical issues.
Especially for exchanges like us, the longer we operate, the higher the probability of becoming a target for attacks.
After this incident, we communicated with some industry peers. I found that many exchanges are using internally developed security solutions. Their perspective is, why rely on third parties? While third parties are not necessarily problematic, once an attack occurs, you lose control. This is a life-and-death issue. You should not entrust your security fate to others. For Bybit, our Bitcoin and other crypto assets are primarily stored in an internally developed security system, but Ethereum handling is somewhat more complicated. The development of Ethereum smart contracts is challenging and requires a specialized expert team, which is where we have not invested enough resources in the past. Looking back, this is one of my greatest regrets. We should have considered these issues as early as the policy-making stage. While we now have relevant experts, the system has yet to be fully upgraded, which is an important issue that needs to be addressed.
Comparison of ETF and exchange security risks
Kevin:
Did this weekend’s event increase attention on the demand for ETFs (exchange-traded funds)? ETFs require custody of assets, and these assets also need to be stored somewhere. Do you think the custody methods of ETFs face similar security risks as Bybit, or are they completely different?
Ben:
Essentially, ETFs and exchanges do face similar risks, but it also depends on how ETFs ensure the security of their assets. It is important to note that Bybit, as an exchange, operates differently from ETFs. Our code wallet solutions require frequent adjustments and maintenance, with redeployments almost every week. In contrast, ETF asset management is relatively static, with most of the time spent in deposit status and only occasional small withdrawals.
Exchanges handle a large volume of deposits and withdrawals daily, including both small and large transactions, while ETFs can choose safer but less efficient solutions due to their lower operational frequency. As an exchange, we must find a balance between efficiency and security. If withdrawal processing times are too long, customers will feel dissatisfied, so our system needs to complete withdrawal operations within minutes.
Analysis of Bybit’s assets before and after the hacking attack
Kevin:
What changes occurred in Bybit’s assets and liabilities before and after the hacking attack?
Ben:
Before the attack, our total customer assets were about $20 billion. In the first few days after the attack, our total assets dropped to $14 billion, and at one point further declined to $10 billion or $12 billion. However, as market sentiment gradually recovered, the total assets bounced back to around $14 billion.
Kevin:
How do you prove that customer assets are safe?
Ben:
Our asset reserves have been independently audited to ensure a 1:1 matching relationship, and I believe no other exchange can make such a claim. Throughout the entire incident, we kept the withdrawal channels fully open, allowing customers to withdraw their assets at any time. Even in the face of a situation resembling a “bank run,” we did not refuse any withdrawal requests. If an exchange’s reserves cannot achieve a 1:1 match, they typically choose to suspend or limit some withdrawals to buy time to raise funds. But we have always…No one has encountered such a situation before. This is, in fact, the greatest test of our reserve system.
The Future Belongs to On-Chain
Kevin:
You have always emphasized that “the future is on-chain.” Does this weekend’s event further highlight the importance of a decentralized Bybit?
Ben:
My perspective has not changed. While the future is indeed moving towards on-chain solutions, that does not mean centralized exchanges will be eliminated. I believe this indicates that infrastructure will improve and there will be more liquidity, similar to the growth of cryptocurrencies over the past few years. From five years ago to today, the entire crypto industry has made tremendous progress, but this does not mean that the stock market is in decline. Thus, my logic is that centralized exchanges are still crucial to the entire ecosystem. Most people need centralized products to enter the crypto world; users might participate briefly due to market hotspots, but there is no intermediary platform for them to gain deeper understanding or long-term use. This is the true significance of centralized exchanges, which provide multiple ecosystems or products for users to stay, explore, and ultimately become local crypto users. At some point, they might explore elsewhere. Even for most who are not initially attracted, they often still hold accounts with centralized exchanges and may have balances in both places, with in many cases, the majority of their balances in centralized exchanges.
The Image Problem of the Crypto Industry
Kevin:
Today, the crypto industry seems to encounter significant events almost every week. How can the public take this industry seriously? What do we need to do to ensure this industry is taken more seriously?
Ben:
I agree that the industry does face some image problems, but we should also focus on the positive progress that has been made. I am not trying to boast, but we have shown a different way of handling recent hacking incidents. I have seen people compare Bybit with FTX, but that is entirely different. We resolved the incident in just three days, which is not common in the industry. Although this hacking event is unfortunate, it has reinforced my goal—to fight against hackers. Additionally, we plan to launch a dedicated website this week to help victims better cope with their losses. I believe this is not just a Bybit issue, but a common challenge that the entire crypto industry needs to face. However, other aspects of the industry have made significant progress. Especially in the area of on-chain activities, many solutions offered by decentralized exchanges (DEX) are now capable of addressing problems that could not be resolved in the past. The crypto industry is still young; if you look back at the early adoption phase of the internet, there were also many issues and challenges, and the infrastructure was not perfect, but it takes time. Therefore, the crypto industry is still very young. I believe that most people no longer simply view cryptocurrencies as scams, and most countries are legalizing and regulating the crypto industry. So, I think this path, although filled with challenges, will only become more stable and rise higher.
Key Lessons and Greatest Regrets
Kevin:
You mentioned before that one of your greatest regrets is not establishing an internal wallet infrastructure. Are there other things you regret?
Ben:
Reflecting on this weekend’s incident, we indeed identified areas that need improvement. For example, our withdrawal system could be designed to be more efficient and seamless. Even in crisis situations, we should strive to ensure that customers can complete withdrawals quickly. The only regret is that we made some customers wait, and they might think we are deliberately obstructing them, which is not our intention. I genuinely wish we could allow everyone to withdraw at any time. I hope to optimize the system in the future so that every customer can withdraw smoothly whenever they want. This not only enhances customer trust in us but also makes them feel more secure, as they can clearly see their assets safely stored in personal wallets. Thus, we need to upgrade the system to perform better in similar incidents. Moreover, I have learned some important lessons in managing the wallet security team. For instance, many people may not have noticed that my CFO was the first signatory, followed by one of our co-founders. Looking back now, one of my greatest regrets is why I allowed such a key role to be a signatory. After a hacker attack, he not only has to bear pressure from the team but also face me, and even his family may be affected. Although we all understand that this is the responsibility of external hackers, such as the ones confirmed to be from North Korea, he may still feel guilty and think he has a responsibility. I am very concerned that he might ultimately choose to leave the company, even though he has been an important partner who has fought alongside me for four to five years. I completely trust him, but I overlooked the fact that involving key roles in signatory processes could place excessive psychological burdens on them during a crisis.
Kevin:
So who do you think is more suitable for this role?
Ben:
It should be someone I trust, but not necessarily a key member of the core team. Ultimately, a signatory just needs to be a trustworthy person without bearing too much responsibility for the company. If my CFO were not involved in the signatory process, he would not find himself in such a situation. Therefore, in the future, I will definitely adjust this process to avoid exposing key personnel to such risks. I cannot imagine the psychological pressure he endured this weekend, and this has made me feel very regretful and realize that process design needs to be more thorough.
Advice for Future Entrepreneurs
Kevin:
What advice do you have for future entrepreneurs looking to enter the crypto industry? After all, similar crisis events may be difficult to avoid.
Ben:
I believe the beauty of our industry lies in transparency and direct communication between entrepreneurs and customers. We can compare ourselves to traditional financial industries, like banks. Even banks rarely handle similar crises in such an open and transparent manner. In the crypto industry, transparency and direct communication between entrepreneurs and customers are crucial. If someone experiences such an event, I believe transparency is key, ensuring that communication remains open. Let customers know you are there; the market will reward you for your transparency.
Why Do Crypto Hackers Succeed Repeatedly?
Kevin:
You’ve been busy for three consecutive days. What will you do half an hour after you return home or to the office?
Ben:
I still have some important matters to handle, such as whether we have identified the truth of the matter. We are forming a dedicated task force to track the flow of funds, and we hope to help the entire industry through this incident, not just solve our own problems. During this crisis, many partners in the industry actively reached out to help without asking for any return. Therefore, I feel we have a responsibility to make some contributions. Whether it’s Lazarus or other hacker issues, these are ongoing challenges in the industry. A significant problem is that when you become a victim of a hacker attack, you often feel very helpless. Hackers know you will track them, but they also understand that if you are just an individual victim or a small company, your resources are limited and you cannot track the flow of funds in the long term. More challenging is that hackers typically scatter funds into smaller amounts, such as $100,000 each, and then transfer them through mixers, bridges, or exchanges. By the time you contact the legal department of an exchange, the funds have already been transferred, and after a few attempts, you might give up. This situation is very common in the industry. Currently, we lack a dedicated information platform to consolidate data related to tracking funds. While there are tools like Chainalysis, when you trace to a certain endpoint (such as a mixer, bridge, or exchange), the funds may have become untraceable or frozen. Hackers typically avoid using easily freezeable assets, like USDC. They will utilize exchanges, mixers, and bridges to delay your time and energy. Eventually, you may find that only two or three people are constantly switching exchanges, and even if these exchanges respond quickly, for example, within half a day, the funds have already been transferred. Hackers utilize this delay tactic to win. To solve this issue, we need to build an industry-level information platform. This platform can display where funds ultimately become untraceable, such as mixers, while also recording the response speed rankings of these platforms. For example, if there are 200 transactions totaling about $50 million flowing into a certain mixer, and that mixer is untraceable, we can seek legal or regulatory assistance based on such data. If these funds are related to Lazarus or other sanctioned organizations, we can take further action.
Lazarus Bounty Program: Helping the Industry Tackle Hacker Attacks
Ben:
We are launching a new website called HackBounty.com. This is an aggregation platform focused on tracking stolen funds, as I mentioned earlier. The interesting aspect of this platform is that anyone can become a “bounty hunter.” You can submit any lead on funds you wish to track. Once you submit the target funds and trace their final destination, we will register you as the bounty hunter for that lead. Subsequently, our team will contact the endpoint of the fund flow and initiate a countdown. The endpoint organization needs to take action: either freeze the funds or provide the next step for the funds. If they fail to respond in time, this delay will be recorded and publicly displayed on the platform, allowing everyone in the industry to see which organizations have not responded to victims’ requests. As an exchange, I am very aware of how this mechanism operates. I do not want my users to see my exchange appear on a “non-cooperative list,” as that would imply we are assisting sanctioned organizations, such as North Korea. Therefore, I will definitely form a dedicated team to quickly respond to these requests. If it is a tool like a mixer, they may gradually be blacklisted by the industry for non-cooperation. Ultimately, I believe we need to leverage the core advantage of blockchain—transparency—to address issues in the blockchain industry. HackBounty.com will aggregate all relevant information, and anyone can release bounty tasks on the platform and become a bounty hunter. Through this platform, we hope to assist all victims in tracking stolen funds while enhancing the overall sense of responsibility and transparency in the industry.
