Atomic Wallet - Self-Custody Under Attack?

Atomic Wallet Hacked

On Saturday, the 3rd of June, Atomic Wallet released a statement via their official Twitter account that numerous users had reported a loss of funds. A few hours prior to writing this article, Atomic Wallet announced that less than 1% of their active monthly users had been affected, or reported being affected. It doesn’t sound too bad. However, for that 1% it could be 100% of their Crypto portfolio.

It’s strange how these events always tend to take place at the worst possible time. It’s rather coincidental that just as self-custody comes under scrutiny, non-custodial wallets experience a series of negative events. It wasn’t that long ago that Ledger introduced its multi-sig recovery system, which was negatively received by serious Crypto investors and OGs, who understand the implications of such a move.

Now, before the dust has even settled on the Ledger event, Atomic Wallet gets compromised with users losing funds. It doesn’t paint a very good picture for newcomers and essentially discourages newcomers in regard to self-custody. During 2022, the narrative was that loss could have been avoided by making use of self-custody solutions, and even cold storage. However, it seems these avenues of trust are now under fire!

Spread The Risk

This brings me to the drum that I keep on beating, and will continue to beat: Diversification. Many only look to diversification in regard to the assets they choose to invest in. However, diversification needs to extend beyond that, and even into the realm of custody. I make use of multiple wallets and have said many times that though it can be a little more complicated, it’s definitely a lot safer.

Ideally, I tend to shift assets around so as not to exceed 10% of my portfolio, in any one particular wallet. Obviously, isolated market valuations, as well as additional Crypto coming in can see those parameters being stretched. A decrease in valuation can therefore bring about the complete opposite. A particular asset that experiences a substantial loss in valuation will simultaneously cause an adjustment.

It’s not a hard and fast rule. However, it’s a great rule of thumb to put into action. Yes, this also applies to cold storage. In my opinion, one should be making use of multiple devices. Risk is never removed. It is however reduced, and even considerably. However, it is always present and one should never become lazy or complacent in regard to the custody of digital assets.

Freedom Is Not Void Of Responsibility

For many the idea of financial freedom and other aspects of freedom is a life void of care. This is however quite the opposite. With great freedoms and benefits come true responsibility. The 9 to 5 worker who sees an online entrepreneur sitting at the beach with his laptop envisions a carefree life. However, many of these entrepreneurs also once worked a typical 9 to 5 job. The only difference is they took on responsibility.

Instead of vegging in front of the TV after work, they chose to begin building. This can sometimes bring a significant increase to the work burden. Why? Well, many will choose to push another five to six hours into the night. This is then further compounded by even more time and effort over the weekend. I get it, many are simply born into a position of privilege or freedom. However, it’s not universal.

There are those who have embraced responsibility and to onlookers, they appear to be “privileged”… not so! Similarly, one needs to take responsibility for the safe keeping of your investments, savings, and wealth. It’s a new age. Regardless of the initial teething problems, this is the way forward. It’s the same with DeFi, we have to see maturation and development that simultaneously brings about stronger levels of safety and protection.

Final Thoughts

The temptation is to simply throw out the baby with the bathwater. Historically, all significant technological advancements were initially met with tremendous hurdles and even, obstacles. It’s important to do what you can to ensure you are better protected than the average investor or participant. This will always include some form of diversification. It’s a proven defense, and one I continue to practice, and always will.

Unfortunately, once such an event takes place, trust is often lost. Even if funds are somehow returned, or investors are made whole, the issue remains, and that is that the service is exploitable. It just takes a single mistake to eradicate years of trust. This is unfortunately the sad truth. Many believe the Atomic Wallet exploit to be an inside job.

We will, however, have to wait to see what the final outcome is, and where and how the actual exploit took place. Unfortunately, another sad event for the Crypto world. On the positive side, we have seen these many times before… we simply soldier forward. Thanks for stopping by, see you next time!

Disclaimer

First of all, I am not a financial advisor. All information provided on this website is strictly my own opinion and not financial advice. I do make use of affiliate links. Purchasing or interacting with any third-party company could result in me receiving a commission. In some instances, utilizing an affiliate link can also result in a bonus or discount.

This article was first published on Sapphire Crypto.