Most people today don’t think twice about putting their hard-earned dollars into a bank. Yet, there is a growing sense of unease for users in the global cryptocurrency community that the platforms for storing tokens and various digital assets are about as safe as the mattress in an upstairs bedroom.

The concern stems from a steady drumbeat of bad news. In late September, Zaif (Tech Bureau, Corp.) reported that 6,000 bitcoin had been stolen from its Japanese cryptocurrency exchange. Another Japanese exchange called Coincheck Inc. lost an eye-catching $500 million in January. And in June, the Seoul-based bitcoin exchange Bithumb disclosed a hack that netted thieves $30 million, the second time in two weeks a cyberattack had victimized a South Korean cryptocurrency operation.

Part of the problem can be found in security flaws built into many of the tools, such as smart contracts, which drive many of the transactions on the blockchain. Hosho Group Inc. has built its business around blockchain security, providing smart contract auditing and penetration-testing services. The company has reported that 82 percent of the smart contracts it audited had vulnerabilities, and more than a quarter of those were critical.

Like microorganisms hungry for nutrients, malicious actors can sense abundance and move in for the kill. “We are all naturally targets,” said Hartej Sawhney (pictured), co-founder and president of Hosho.  “It’s not about how much bitcoin you have. It’s about how much bitcoin someone thinks you have.”

Sawhney spoke with John Furrier (@furrier), host of theCUBE, SiliconANGLE Media’s mobile livestreaming studio, during the recent HoshoCon event in Las Vegas. They discussed large company interest in building on the blockchain, continuing problems with a lack of regulatory clarity, Hosho’s recent partnerships, and plans for new releases to bolster cryptocurrency protection.

This week, theCUBE features Hartej Sawhney as its Guest of the Week.

Largest companies explore blockchain

Security flaws in the cryptocurrency space are a problem because large-scale blockchain adoption by major companies, and a potential big-time payoff for nascent businesses in the space, is coming. Forbes recently compiled and published a list of the world’s largest public companies currently exploring blockchain innovation, and it includes the globe’s biggest firms.

Sawhney is well aware that large enterprises are circling. “You look around these conferences, and you don’t see too many suits,” Sawhney said. “But in the Fortune 500, many of them are either writing private blockchains or evaluating how they are going to use blockchain technology in their major businesses. The suits are coming.”

When the suits finally arrive, they will find an industry not only grappling with security concerns, but regulatory issues as well. And the climate has not been especially friendly from a government standpoint, at least in the United States.

Although there had been signs earlier in the year that the U.S. government was willing to engage in dialogue with the cryptocurrency community, the Securities and Exchange Commission has significantly widened its crackdown on initial coin offerings in recent months. Reports this month indicate that after issuing information-seeking subpoenas in the beginning of this year, the SEC is returning to the same companies and exerting pressure to settle through payment of steep fines and return of funds to investors.

The SEC shut down two bitcoin and ether securities in September, after previously closing coin offerings Munchee, Centra Tech and AriseBank earlier this year. This has left a number of startup companies in the cryptocurrency space debating whether to ride out the storm in the U.S., where regulatory guidance has been lacking, or flee to smaller countries that have provided clarity around what is permissible and what is not.

The tiny European country of Malta has emerged as one of the world’s friendliest jurisdictions for cryptocurrency entrepreneurs, leading the country’s prime minister to tell world leaders at a United Nations gathering in New York last month that his country was now “Blockchain Island.”

“It shows the immaturity of this space if very legitimate companies are all going to flee to small countries like Malta or to islands like Bermuda,” Sawhney said. “At the end of the day, Malta is also part of the European Union, and if the EU changes their mind, things can change in Malta.”

New tools for developers

While regulatory uncertainty swirls around the cryptocurrency space, companies like Hosho are working to at least address security concerns. The company has developed Meadow Suite as a tool for developers to use in smart contract creation, making the software freely available on GitHub.

Hosho is also getting ready to release a multi-signature wallet for Ethereum users along with a Telegram bot to improve the detection of phishing attacks. “This is going to be a unique, multi-sig wallet that we release,” Sawhney said. “It’s going to be very secure.”

Hosho has also turned toward designing its tools for use by large, publicly traded companies. The company is part of an initiative involving cybersecurity provider Rivetz Corp. and the Spanish telecommunications giant Telefónica, S.A. to leverage blockchain technology in one bundled security package, according to Sawhney.

“It’s wonderful to be able to leverage that kind of a brand to deal with major worldwide entities that are publicly traded,” Sawhney stated.

Meanwhile, companies such as Hosho at the front lines of fast-moving, highly volatile cryptocurrency projects keep one eye out for trouble, whether it might be regulatory or predatory. In a sign of the paranoia engulfing some of the high-profile cryptocurrency players, the digital asset exchange ShapeShift lists members of its team (below the top management level) by first names only.

It’s a move designed to keep its employees from becoming targets in an industry that still has a long way to go before reaching a level of security, maturity and government acceptance where such measures will no longer be necessary.

“Some of the more interesting conversations I’ve been having with people have been along the lines of ‘what are you doing to protect you and your family in regard to your physical security?’” Sawhney said. “The next two to three years are going to be very interesting.”

Here’s the complete video interview, part of SiliconANGLE’s and theCUBE’s independent coverage of HoshoCon 2018:

Photo: SiliconANGLE