1. Introduction

1.1 Background and Purpose

Ethereum (ETH), as a representative of blockchain 2.0, occupies a pivotal position in the cryptocurrency field. It is not only the second largest cryptocurrency by market value after Bitcoin, but also an open-source public blockchain platform with smart contract functionality, providing developers with an environment to build and deploy decentralized applications (DApps). A large number of decentralized finance (DeFi) projects, non-fungible token (NFT) projects, and other projects are built on the Ethereum platform, covering ecosystems in finance, gaming, social, and other fields, attracting investors, developers, and users globally.

However, with the continuous rise in the value of Ethereum and the increasing complexity of its ecosystem, frequent theft incidents involving ETH have had a huge impact on users and the entire cryptocurrency market. From large-scale fund theft caused by early smart contract vulnerabilities to the emergence of new attack methods in recent years, such as phishing attacks, private key leaks, and exchange security vulnerabilities, these events have not only resulted in direct losses of user assets but also severely affected market participants’ trust in the security of Ethereum, hindering the healthy development of the cryptocurrency industry.

The typical case of ETH theft

2.1 Bybit Exchange $1.5 Billion ETH Theft Incident

On the evening of February 21, 2025, Bybit, a globally renowned cryptocurrency exchange, suffered the largest-scale hack in the history of cryptocurrency, with approximately $1.5 billion worth of 400,000 Ether (ETH) and stETH stolen, equivalent to about 10.8 billion RMB. The hacking method used in this attack was extremely sophisticated. The attackers manipulated the logic of smart contracts, cleverly replacing Bybit’s Ethereum cold wallet’s multi-signature contract, successfully bypassing the risk control system, and transferring the assets. The attack exploited the DELEgateCALL instruction and possible man-in-the-middle attack method, accurately controlling the cold wallet.

On the timeline, on February 19, the malicious contract had already been pre-deployed, laying the groundwork for subsequent attacks; at 14:13 on the 21st, the hacker initiated a critical transaction to replace the contract; at 23:30 on the 21st, the stolen funds were transferred to an unknown address. The entire process was carefully planned and prepared.

The incident has had a huge impact on the cryptocurrency market. Bitcoin fell by more than 1.88% within 24 hours, dropping below $95,000; Ethereum fell by 2.35%, with a 24-hour drop as high as 6.7%. Over 170,000 people worldwide were liquidated, with losses exceeding $570 million. Bybit’s native token BYB plummeted by 12.3% in a single day. This event not only caused significant losses to investors but also severely hit market confidence, triggering widespread concerns about the security of cryptocurrency exchanges.

Bybit officials quickly responded to the incident, stating that other cold wallets are safe, customer assets are not affected, and they have initiated a bridge loan (80% of funds raised) to safeguard user withdrawals. At the same time, the platform has reported the case to the police and is cooperating with blockchain analysis companies to track the stolen funds. However, industry insiders generally believe that the likelihood of recovering the stolen funds is low due to the anonymity and complexity of blockchain transactions. Security agencies have confirmed that the mastermind behind this attack is the North Korean hacker group Lazarus Group, which previously stole $200 million worth of bitcoin from a South Korean exchange in 2017. Their sophisticated attack methods and extensive experience in multiple incidents have posed significant challenges for prevention and tracking in this case. This incident has also exposed potential vulnerabilities in the centralized exchange cold storage systems, prompting investors to rethink asset storage methods, with some turning to hardware wallets and decentralized exchanges. Decentralized exchange (DEX) trading volume has surged by 40%.

2.2 The theft of 12083 Ether in the ‘Godfish’ incident

A portion of the Ether managed by ‘DiscusFish,’ a prominent figure in the Chinese cryptocurrency circle and co-founder of F2Pool mining pool, was stolen. The specific amount is 12083 Ether, which, calculated at the time’s value, exceeds 200 million RMB. This incident has sparked widespread discussion in the Chinese crypto community.

The theft occurred on an Ethereum wallet address managed by “Shenyu”, and the hacker exploited vulnerabilities in the smart contract to launch the attack. Specifically, the hacker bypassed the wallet’s security checks by carefully crafting transactions. They exploited logic flaws in the smart contract code to successfully transfer funds under the guise of a normal transaction. On September 28th, an address signed a phishing contract signature, resulting in the theft of 12083 spETH, worth approximately $32.43 million. On-chain detective ZachXBT discovered that the victim and czsamsun on Debank (Shenyu address 0x902) transferred 9-digit numbers to each other, leading to the speculation that they are likely the same entity.

After the incident, the ‘Godfish’ quickly took a series of response measures. He actively cooperated with exchanges, security agencies, etc., to track the flow of funds and try to find the whereabouts of the stolen funds. At the same time, the ‘Godfish’ also attempted to recover the losses through legal means, leveraging the power of the law. However, due to the anonymity and irreversibility of blockchain transactions, each transaction is encrypted and recorded on the blockchain, making it difficult to trace the real identities of the traders, and once the transaction is completed, it cannot be reversed. This makes the work of recovering stolen funds face significant challenges.

This incident has also sounded a security alarm for the cryptocurrency community, reminding all participants that even industry veterans may face the risk of asset theft. The security of smart contracts cannot be ignored, as any minor vulnerability could be exploited by hackers, leading to significant losses.

2.3 Upbit Exchange 342,000 ETH Theft Incident

On November 27, 2019, Upbit, a well-known cryptocurrency exchange in South Korea, announced that 342,000 Ether (ETH) in its hot wallet was stolen. At that time, the value of the stolen assets was approximately 58 billion Korean won (about 300 million yuan), and with the passage of time, based on the current value, it is approximately 147 trillion Korean won.

After a long investigation, the South Korean police officially confirmed for the first time that the theft was carried out by the North Korean reconnaissance bureau’s hacker groups ‘Lazarus’ and ‘Andariel’. The conclusion was drawn based on the analysis of North Korean IP addresses, the flow of virtual assets, traces of North Korean vocabulary usage, and evidence obtained through cooperation with the Federal Bureau of Investigation (FBI) in the United States.

After stealing ETH, the hackers exchanged 57% of the ETH for Bitcoin at 2.5% below the market price, while the remaining assets were laundered through 51 overseas exchanges in an attempt to disguise where the funds were coming from and where they went. After 4 years of unremitting tracking, the police successfully proved that the bitcoin was a stolen asset of the South Korean side through evidence to the Swiss prosecutor, and successfully recovered 4.8 bitcoins (about 600 million won) from a Swiss exchange in October this year and returned them to Upbit. Despite the recovery of some assets, the recovered funds are only a small fraction of the huge amount of ETH stolen, and this incident has brought huge losses to the Upbit exchange and users, and has also triggered a deep reflection on the security and supervision of exchanges in the cryptocurrency industry in South Korea and even around the world.

2.4 implanting trojans to steal more than 380 Ether cases

In March and April 2018, when the defendant Li Moumou was maintaining a server for customer Miao Moumou, he used his own technology such as “implanting Trojan horses” and aggregating scattered ETH to implant a Trojan horse program in Miao’s database. Since then, Li Moumou has transferred a total of 383.6722 ETH from the e-wallet of the victim Miao’s mobile app “imToken” App more than 520 times, and exchanged these ETH for 109458 USDT (Tether) through the e-wallet he created. According to the virtual currency tracking report of the “Case of Miao Moumou’s Illegal Acquisition of Computer Information System” investigated and issued by a professional company, the 3,836,722 ether that the defendant Li Moumou transferred to the collection wallet was worth about 430,000 yuan at that time.

In September 2020, the Guangxin District Public Security Bureau of Shangrao City received a report from the victim Mou, stating that about 384 Ether (ETH) stored in the electronic wallet had been stolen. After accepting the case, the Cyber ​​Security Brigade of the Guangxin District Public Security Bureau quickly launched an investigation. Through analysis and judgment, the suspect was successfully identified as Li, a native of Chongqing, and was arrested.

Recently, the People’s Court of Guangxin District, Shangrao City, Jiangxi Province, sentenced the defendant Li to ten years and six months in prison for theft, and imposed a fine of RMB 200,000. After being arrested, Li was caught by the police, who used technical means to return all the approximately 109,458 Tether coins exchanged by Li to the victim Miao.

This case serves as a warning that while enjoying the convenience brought by blockchain technology, one should not overlook cybersecurity issues. For ordinary users, it is important to choose secure and reliable wallets and trading platforms, carefully safeguard private keys and mnemonic phrases, avoid clicking on suspicious links and downloading software from unknown sources at will, to prevent the implantation of malicious programs and asset theft. At the same time, it also reminds relevant enterprises and institutions to enhance the security protection of servers and systems, conduct regular security testing and vulnerability repairs, to prevent hackers from exploiting technical vulnerabilities to launch attacks.

3. in-depth analysis of the reasons for the theft of ETH

3.1 Technical Factors

3.1.1 Hacker Attack Methods

Phishing attacks are one of the common methods used by hackers to obtain users’ private keys or seed phrases. Hackers elaborate websites or apps that closely resemble official Ethereum wallets, well-known exchanges, or other related service platforms, and then send fake links to users via email, social media messages, instant messengers, and more. These links are often disguised as legitimate transaction requests, account security alerts, or software update notifications to trick users into clicking on them. Once a user enters their private key, seed phrase, or other sensitive information on these fake interfaces, hackers can immediately obtain this critical data and take control of the user’s Ethereum wallet to transfer ETH assets from it.

Malware is also a commonly used attack tool for hackers. Hackers develop various types of malware, such as Trojan horses, viruses, spyware, etc., and spread them to users’ devices through various means. These malware can disguise themselves as normal software programs, games, documents, etc. When users download and run these disguised programs, the malware will quietly install and lurk on the device. They can, without the user’s awareness, record the user’s keyboard input, screen operations, and other information, thereby obtaining the private key or mnemonic phrase entered by the user in the Ethereum wallet operation process. In addition, malware may also directly modify the wallet file on the user’s device or intercept the communication data between the user and the Ethereum network to steal the user’s asset information.

Network vulnerabilities are also important entry points for hacker attacks. The Ethereum network and its related infrastructure, including node servers and smart contract execution environments, may have various security vulnerabilities. For example, some node servers may be at risk of being hacked due to improper configuration and delayed software updates. Hackers can exploit these vulnerabilities to gain control of the servers, thereby obtaining user wallet information stored on the servers or tampering with transaction data in the Ethereum network to steal ETH assets. In addition, some communication protocols in the Ethereum network may also have vulnerabilities, allowing hackers to intercept communication between users and Ethereum nodes through methods such as man-in-the-middle attacks, and steal sensitive data such as user transaction information and private keys.

3.1.2 Smart Contract Vulnerability

Smart contracts are a core component of the Ethereum ecosystem. They are self-executing contracts deployed on the Ethereum blockchain in the form of code. The main function of smart contracts is to implement various business logics of decentralized applications (DApps), such as lending, trading, asset management in decentralized finance (DeFi) projects, as well as operations like digital asset ownership management and trading in non-fungible token (NFT) projects. The code of smart contracts is public and transparent, and cannot be tampered with on the blockchain, allowing parties to automatically execute transactions according to the contract’s conditions without the need to trust a third party.

However, when smart contracts have design flaws, they can be exploited by hackers to commit theft. For example, in some smart contracts, there may be vulnerabilities such as integer overflow or underflow. Integer overflow refers to when an integer variable reaches its maximum value and then undergoes addition, causing the value to wrap around to the minimum value; integer underflow refers to when an integer variable reaches its minimum value and then undergoes subtraction, causing the value to wrap around to the maximum value. Hackers can exploit these vulnerabilities to manipulate certain variables in smart contracts through carefully crafted transactions, bypassing the contract’s security checks and illegally transferring user assets.

3.2 Human Factors

3.2.1 Insufficient User Security Awareness

Many users choose to use simple number combinations, birthdays, phone numbers, etc. as passwords for their Ethereum wallets to make it easier to remember. These weak passwords are easily obtained by hackers through brute force or dictionary attacks. Once a hacker cracks a user’s password, they can easily log in to the user’s wallet and steal their ETH assets. In addition, some users use the same password across multiple platforms and applications for convenience. If one platform has a security vulnerability that leads to password leakage, hackers can use this password to try to log in to the user’s Ethereum wallet, thereby increasing the risk of asset theft for the user.

3.2.2 Social Engineering Attacks

Hackers often impersonate customer service personnel of Ethereum wallets, contacting users through phone calls, emails, social media private messages, etc. They may use reasons such as account security issues, system upgrades, abnormal transactions, etc., to induce users to provide wallet private keys, mnemonic phrases, or other sensitive information. For example, a hacker may send an email that appears to be from Ethereum’s official customer service, claiming that the user’s wallet is at security risk and requires the user to click on a link for identity verification and security settings update. When the user clicks the link, they will enter a phishing website that looks very similar to the official Ethereum website, and any information entered on this website will be obtained by the hacker.

3.2.3 Improper Operation

Some users lack the necessary security awareness and caution when investing or trading in Ethereum. Without fully verifying the contracts, they authorize unknown contracts to use their funds. These unknown contracts may contain malicious code, and once authorized, the contracts can transfer the user’s ETH assets to hacker-controlled addresses without the user’s knowledge. For example, in some decentralized finance (DeFi) projects, in pursuit of high returns, users blindly participate in unknown lending, financial management, and other projects. When authorizing the contracts, they fail to carefully review the code and functionality of the contracts, resulting in hackers taking away all their assets through contract vulnerabilities.

3.3 Platform-level factors

3.3.1 Exchange Security Vulnerabilities

Some exchanges have vulnerabilities in the management of cold wallets, leading to attacks on the cold wallets. Cold wallets are generally considered a secure way to store cryptocurrencies because they store private keys offline, reducing the risk of being hacked. However, if there are security vulnerabilities in the generation, storage, or use of an exchange’s cold wallet, such as private key leakage or cracking of the cold wallet hardware, hackers may be able to obtain the private keys in the cold wallet and control the ETH assets within. For example, in the Upbit exchange’s ETH theft incident, hackers successfully attacked its hot wallet and stole a large amount of ETH assets. Although hot wallets and cold wallets are different, this also reflects the overall insufficient security protection of exchanges, which fails to effectively protect user assets.

The platform system of the exchange may also have various vulnerabilities, such as software vulnerabilities, network vulnerabilities, etc. These vulnerabilities may allow hackers to invade the exchange’s servers, access sensitive data such as user account information, transaction records, and wallet addresses. Hackers can use this information to transfer users’ ETH assets through various means. For example, hackers may use SQL injection attacks to obtain user account information in the exchange database, and then use this information to log in to user accounts and transfer assets. In addition, insufficient network protection measures at the exchange may also allow hackers to disrupt the normal operation of the exchange and steal users’ transaction data and asset information through network attacks such as DDoS attacks, man-in-the-middle attacks, etc.

3.3.2 Security risks of wallet service providers

Wallet service providers may have security issues at the technical level, such as insufficient encryption algorithm strength and poor private key management. If the encryption algorithm used by the wallet service provider is not strong enough, hackers may obtain the private key in the user’s wallet through brute force cracking or other means, thereby controlling the user’s ETH assets. In addition, if the wallet service provider does not take strict security measures in the process of generating, storing, and transmitting private keys, such as storing private keys without encryption, being stolen during transmission, it will also expose the user’s assets to the risk of theft. For example, some small wallet service providers may not be able to provide a secure enough encryption and private key management mechanism due to limited technical capabilities, making users’ wallets vulnerable to attacks.

At the management level, wallet service providers may have issues such as incomplete security management systems and insufficient employee security awareness. If a wallet service provider fails to establish a sound security management system, lacking strict access control, data backup and recovery mechanisms, security audit systems, etc., in the event of a security incident, they will be unable to respond promptly and effectively, leading to user asset losses. In addition, if the employees of the wallet service provider lack security awareness, they may be vulnerable to phishing attacks, social engineering attacks, etc., resulting in the leakage of user wallet information. For example, if the employees of the wallet service provider casually log into the wallet management system while using public networks, or click on links in suspicious emails, it may lead to hackers obtaining user wallet information.

4. The Impact of ETH Theft

4.1 Direct Impact on Users

4.1.1 Loss of Funds

In the event of the theft of 12,083 Ether coins in ‘ShenYu’, more than 200 million RMB worth of ETH was stolen. This is a huge financial blow for ‘ShenYu’ and its backing investment team. As a well-known figure in the industry, ‘ShenYu’s investment activities often involve multiple projects and fields. The theft of this large sum of money not only affects his personal net worth, but may also result in damage to his interests in some investment projects, forcing him to reassess and adjust his investment layout. For ordinary users, such as the victim Mou Mou in the case of more than 380 Ether coins stolen by a trojan horse, the 383.6722 Ether coins stolen were worth about 430,000 RMB at the time. This may represent many years of savings for an ordinary family, and the theft severely impacts their family’s financial situation and quality of life, disrupting their original plans for housing, education, retirement, etc.

4.1.2 Confidence Dented

The ETH theft incident has created a deep fear and distrust among users regarding cryptocurrency investments. Many users have serious doubts about the security of cryptocurrencies after experiencing asset theft, fearing that their assets could be lost again at any time. This fear has led them to become extremely cautious in their subsequent investment decisions, even to the point of abandoning cryptocurrency investments altogether. For example, some users who were originally actively involved in Ethereum ecological projects not only transferred their remaining ETH assets to other relatively safe storage methods, such as hardware wallets, after experiencing wallet theft, but also took a wait-and-see attitude towards the entire cryptocurrency market and no longer easily participated in new investment projects.

4.2 Impact on the cryptocurrency market

4.2.1 Market Fluctuations

Major ETH theft incidents often trigger drastic fluctuations in the cryptocurrency market. Take the example of the 1.5 billion USD ETH theft incident at Bybit exchange: following the event, Bitcoin plummeted by over 1.88% within 24 hours, dropping below 95,000 USD; Ethereum saw a 2.35% decline, with a staggering 6.7% drop in 24 hours. The main reasons for these price fluctuations are as follows: firstly, investors’ panic selling. Upon learning about the massive ETH theft incident at Bybit exchange, users became concerned about the overall security of the cryptocurrency market. To avoid further asset losses, they hurriedly sold off their cryptocurrencies, including Bitcoin, Ethereum, and other mainstream coins, leading to an oversupply in the market and subsequent price declines.

4.2.2 Changes in Investor Behavior

The theft of ETH has prompted investors to adjust their investment strategies. Many investors are now paying more attention to the secure storage of their assets and are turning to the use of hardware wallets. A hardware wallet is a physical device specifically designed for storing cryptocurrency private keys, which typically operates offline, reducing the risk of private key theft by hackers. For example, following some major ETH theft incidents, the sales of hardware wallets have significantly increased. According to market research data, well-known hardware wallet brands such as Trezor and Ledger saw sales grow by over 50% in the month following the incidents.

4.3 Impact on Industry Development

4.3.1 Trust Crisis

The frequent theft of ETH has triggered a crisis of trust in the cryptocurrency industry among the public. In the eyes of the general public, the cryptocurrency market is already full of uncertainties and risks, and the continuous exposure of ETH theft incidents has deepened their doubts about the security of cryptocurrencies. This lack of trust not only affects the confidence of existing investors but also deters potential investors from entering the cryptocurrency market. Many individuals and institutions who were originally interested in cryptocurrencies have abandoned their plans to enter the market due to concerns about asset security. For example, some traditional financial institutions had plans to enter the cryptocurrency field, but after seeing the severity of the ETH theft incidents, they have temporarily suspended or canceled their related business expansion plans.

4.3.2 Strengthened supervision

The theft of ETH has attracted high attention from governments and regulatory agencies around the world, prompting them to adjust and strengthen their regulatory policies for the cryptocurrency industry. Many countries are increasing their supervision of cryptocurrency exchanges, requiring them to enhance security measures and improve the level of user asset protection. For example, the U.S. Securities and Exchange Commission (SEC) has tightened its compliance reviews of cryptocurrency exchanges, requiring them to have sound risk management mechanisms, secure audit systems, and user fund protection measures, or face severe penalties.

5. Preventive measures and countermeasures for ETH theft

5.1 User-Level Preventive Measures

5.1.1 Enhanced Security Awareness

Users should actively learn about the security of cryptocurrencies, understand the working principles of Ethereum wallets, the importance of private keys and mnemonic phrases, as well as the potential risks in cryptocurrency transactions. This can be achieved by reading professional blockchain security books, participating in online and offline cryptocurrency security training courses, and following well-known blockchain security experts and media for information, continuously enriching their security knowledge. For example, some well-known blockchain security media such as CoinDesk and The Block regularly publish the latest developments and analytical articles on cryptocurrency security. Users can continue to follow these media to timely grasp the latest security information.

Users should always be vigilant against phishing attacks and social engineering attacks. When receiving any links, files, or information related to Ethereum wallet operations, it is essential to carefully verify their authenticity. Do not easily click on links from unfamiliar emails, social media accounts, or messages; maintain a high level of suspicion for requests asking for private keys, mnemonic phrases, or other sensitive information, and do not provide them casually. For example, when faced with an email that appears to be from the official Ethereum team, requesting users to click on a link for wallet upgrades, users should first verify the authenticity of the email through official channels such as the Ethereum official website, official social media accounts, etc., to avoid asset theft due to clicking on phishing links.

5.1.2 Security Settings and Operations

When setting a password for an Ethereum wallet, users should follow the principle of strong passwords. The password should contain both uppercase and lowercase letters, numbers, and special characters, with a length of at least 12 characters, and avoid using easily guessed passwords such as birthdays, phone numbers, simple number combinations, etc. For example, a strong password could be “Abc”.@1234567890Such password combinations greatly increase the difficulty of being cracked. At the same time, to prevent password forgetting, users can use password management tools, such as LastPass, 1Password, etc., which can help users generate complex passwords and securely store and manage passwords.

Regularly changing passwords is also an important measure to protect the security of the wallet. It is recommended that users change their wallet password every 3 to 6 months to reduce the risk of password being cracked. In addition, users should enable two-factor authentication (2FA) such as SMS verification code, Google Authenticator, hardware token, etc. Two-factor authentication adds an additional security layer to the user’s account, so even if the password is leaked, hackers cannot access the user’s wallet without the second factor verification.

During wallet operations, users should ensure the security of the operating environment. Avoid operating Ethereum wallets on public Wi-Fi networks because public Wi-Fi networks are often less secure, making it easy for hackers to eavesdrop and attack, leading to the theft of user wallet information. If wallet operations must be performed on a mobile device, use mobile data networks and ensure that the device is equipped with reliable antivirus software and a firewall to prevent malicious software intrusion.

5.1.3 Select a secure wallet

A hot wallet is an online wallet connected to the internet, known for its convenience as users can conduct transactions anytime, anywhere. Common hot wallets include MetaMask, MyEtherWallet, etc. However, hot wallets are relatively less secure due to their internet connection, making them vulnerable to risks such as hacking, malware, and phishing attacks. If the private key or mnemonic phrase of a hot wallet is leaked, the user’s assets may be at risk of theft.

A cold wallet is a wallet that stores private keys offline, and it is not connected to the internet, so the risk of being hacked is greatly reduced. Cold wallets mainly include hardware wallets and paper wallets. A hardware wallet is a physical device that is specifically used to store the private keys of cryptocurrencies, such as the Ledger Nano S, Trezor, etc. Hardware wallets usually employ a variety of security technologies, such as cryptographic chips, multi-signatures, etc., to protect the security of private keys. Paper wallets, on the other hand, print the private and public keys on a piece of paper that users can keep in a safe place, such as a safe. Cold wallets are highly secure and suitable for storing large amounts of ETH assets, but they are relatively inconvenient to use, and each transaction requires some additional operations.

A software wallet is a wallet application installed on a computer or mobile device, which can be a hot wallet or a cold wallet. The advantage of a software wallet is its convenience and rich features, allowing users to easily manage their assets. However, the security of a software wallet depends on the security of the device and the user’s operating habits. If the device is infected with malware or the user operates improperly, the private key of the software wallet may also be compromised.

For ordinary users, if you are only making small ETH transactions and daily use, you can choose a hot wallet with high security, such as MetaMask, and pay attention to protecting the wallet’s private key and mnemonic, and take security measures such as strong passwords and two-step verification. If users hold a large amount of ETH assets, it is recommended to use cold wallets for storage, such as hardware wallets Ledger Nano S or Trezor, to ensure the safety of the assets. When choosing a wallet, users should also pay attention to factors such as the wallet’s reputation, developer background, and security audits, and choose a reputable, safe and reliable wallet.

5.2 Security Safeguards at the Platform and Service Provider Level

5.2.1 Technical Upgrade and Bug Fix

Exchanges and wallet service providers should continuously invest resources to upgrade security technologies to cope with increasingly sophisticated network attacks. Use advanced encryption algorithms to encrypt and transmit user wallet information, transaction data, etc., to ensure the confidentiality and integrity of the data. For example, use the AES (Advanced Encryption Standard) algorithm to encrypt and store user’s private keys to prevent key theft. At the same time, strengthen the encryption of network communication, use SSL/TLS protocols and other technologies to ensure the security of communication between users and the platform, and prevent man-in-the-middle attacks.

Regular security audits are an important means of identifying and addressing security issues. Exchanges and wallet service providers should invite professional security audit firms to conduct comprehensive security audits on their systems. Security audits can include vulnerability scanning, penetration testing, code reviews, and more. Vulnerability scanning helps detect common security vulnerabilities in the system, such as SQL injection, cross-site scripting (XSS), etc.; penetration testing simulates hacker attacks to attempt to breach the system and uncover potential security risks; code reviews can check for security vulnerabilities in the platform’s code, such as logic flaws in smart contract code. Based on the results of the security audit, promptly address any discovered vulnerabilities and issues to continuously improve the system’s security performance.

5.2.2 Establish Emergency Response Mechanism

The platform should establish a sound emergency response plan, clearly defining the response process and division of responsibilities in the event of ETH theft. The emergency response plan should include monitoring and detection of incidents, reporting and notification of incidents, emergency response measures, recovery and reconstruction, etc. For example, when abnormal transactions or suspected theft are detected in the system, the emergency response mechanism should be activated immediately, and relevant personnel should promptly assess and analyze the incident, determine the nature and scope of the incident.

In the event of a theft, the platform should be able to take swift action to reduce user losses. Immediately freeze relevant accounts and transactions to prevent further transfer of stolen funds; Notify users of account theft and provide corresponding solutions and suggestions, such as instructing users to change passwords, transfer remaining assets, etc.; At the same time, it actively cooperates with the investigation work of the police and relevant agencies, provides necessary technical support and data assistance, and assists in the recovery of stolen goods.

5.3 Industry Self-discipline and Regulation

5.3.1 The Role of Industry Self-Regulatory Organizations

Self-regulatory organizations play an important role in the cryptocurrency industry by providing norms and guidance. These organizations are composed of companies, institutions, and experts in the industry, aiming to establish industry standards and norms, promote communication and cooperation between enterprises, and jointly safeguard the healthy development of the industry. In terms of ETH security, self-regulatory organizations can develop a series of security standards and best practice guidelines, such as wallet security standards, exchange security specifications, etc., to guide companies in strengthening security management and enhancing security protection levels.

Industry self-regulatory organizations can also organize safety training and educational activities to enhance the safety awareness and skills of industry practitioners. By holding safety seminars, training courses, online lectures, and other forms, they can impart the latest safety knowledge and technology to enterprises and individuals in the industry, share safety experiences and cases, and help them better cope with various security risks. In addition, industry self-regulatory organizations can also establish a safety information sharing mechanism to promptly report safety incidents and risks within the industry, promote information exchange and collaboration among enterprises, and jointly prevent security threats.

5.3.2 Improvement of Regulatory Policies

Government regulatory agencies should strengthen supervision of the cryptocurrency industry, improve relevant regulatory policies and regulations. Clarify the legal status and regulatory framework of cryptocurrencies, regulate the issuance, trading, storage, and other aspects of cryptocurrencies, and ensure the industry’s development on a legal and compliant track. Strengthen supervision of exchanges and wallet service providers, requiring them to have sound security management systems and risk prevention measures, and rectify or shut down platforms that do not meet security requirements.

Regulators can establish sound regulatory mechanisms, strengthen daily monitoring and law enforcement inspections of the cryptocurrency market. By monitoring market transaction data in real-time, abnormal transactions and potential security risks can be promptly identified; conducting on-site inspections of platforms to verify the implementation of security measures and compliance with regulations. For platforms engaged in violations and security risks, strict penalties will be enforced in accordance with the law to maintain market order and protect investor rights.

5.4 Strategies for dealing with theft

5.4.1 Emergency Response Measures

Once a user discovers that their wallet has been stolen, they should take immediate emergency measures to minimize losses. Quickly change all passwords related to the wallet, including wallet login password, transaction password, associated email password, etc. Ensure that the new password is complex enough, containing both uppercase and lowercase letters, numbers, and special characters, with a length of no less than 12 characters, to increase password security.

At the same time, immediately suspend all trading activities to prevent further transfer of assets by hackers. If the wallet is tied to an exchange, you should contact the exchange as soon as possible, inform them of the compromised account, and ask the exchange to help freeze the account or take other protective measures to prevent further outflow of funds.

5.4.2 Assist in investigation and asset recovery

The user shall actively cooperate with the investigation of the police and relevant agencies and provide all evidence and information related to the theft. This evidence and information includes the wallet’s transaction records, records of communications with hackers (if any), suspicious transaction addresses, records of operations before and after theft, etc. Through blockchain explorers, such as Etherscan, users can obtain detailed transaction records that are important for tracing the flow of stolen funds and determining the identity of hackers.

During the investigation process, users should maintain close communication with the police and relevant authorities, promptly understand the progress of the investigation, and provide necessary assistance as requested by them. Although it is difficult to recover stolen funds, actively cooperating with the investigation may increase the chances of recovering the funds, and also help combat cryptocurrency-related crimes, maintaining the security and stability of the entire cryptocurrency market.

Conclusion

The security of ETH is essential for the protection of users’ assets, the stability of the market, and the healthy development of the industry. All parties need to work together to raise awareness of security precautions and strengthen the application and supervision of security technologies to ensure the security of the ETH ecosystem. Through continuous in-depth research, it is expected to provide a more comprehensive and effective guarantee strategy for ETH security and promote the safe and stable development of the cryptocurrency industry.