Friend or foe: artificial intelligence and the security of the crypto industry

Artificial intelligence and deepfakes

The first wake-up call regarding security issues and artificial intelligence (AI) was the spread of so-called deepfakes. This was announced by the head of the security service of the Binance cryptocurrency exchange, Jimmy Su. In his opinion, the spread of deepfakes will intensify following the software used by artificial intelligence.

A deepfake itself is an artificially created image of a person or a video of him. Existing pictures or videos are superimposed on each other and a new product is obtained, the realism of which is very high. Distinguishing voice, facial expressions or body movements from the real ones will be quite difficult even for professionals in the field of artificial intelligence.

Naturally, attackers could not bypass such tools. For example, in the crypto industry, scammers use deepfakes to try to impersonate well-known representatives of the industry.

However, synthesized images and videos can also play a positive role. For example, if you urgently need a photo, but it is not available. Or you need to be in zoom and do something else at the same time – there are many options. But the use of deepfakes by scammers is a completely different scenario.

Yes, known happening with Sam Bankman-Fried. In November 2022, someone under his verified account, using special software, released a video clip in which the former CEO of FTX allegedly promises to compensate users of the exchange. Video fast enough sold out over the internet. In fact, it offered to follow the link, after which the crypto wallets of gullible users would be devastated.

According to Jimmy Su, the only way to deal with deepfakes is to educate users about what miscalculations AI makes when it tries to take a new image or video.

Deepfakes and KYC

Representatives of the Binance cryptocurrency exchange, including the site’s head of security, believe that the most vulnerable place for a deepfake attack is the KYC (“know your client”) identification system. So, personal information and finances of users can be compromised.

As of 2023, KYC is used by almost all centralized exchanges (CEX). In this regard, this system will be under threat not only in Binance, but also on other platforms. How would this happen?

The principle is the following:

1. First, photographs are searched on the Internet in order to create a new product.

2. With the help of the found pictures, videos are created.

3. There is a publication of newly created characters, which are difficult to distinguish from real ones.

Jimmy Su believes that deepfakes are mainly used to spread all sorts of scams in crypto enthusiast communities. At the same time, in his opinion, the technology has not yet reached the level where it will be impossible to distinguish the virtual from the real. He said:

“Some verification processes ask the user to blink their left eye or look left or right, down or up. Deepfakes are now quite advanced and can execute such commands. However, when we look at these videos, there are certain parts that we can detect with the human eye, such as when asked to turn the head to the side.”

Binance has already started publishing in its blog information on how to properly manage the risks associated with deepfakes. Representatives of the exchange admit that they themselves use AI and machine learning to detect unusual patterns in logins and transactions, as well as other “anomalous” phenomena on the platform.

Thus, artificial intelligence is used by two parties at once. It can be both harmful if used by scammers, and beneficial by protecting against deepfakes.

Web3 Security Specialist alias Noerek.eth wondersbut can’t deepfakes be used in the Ledger “Recover” update, because if you lose your seed phrase, you can request it after passing verification through KYC.

“What if someone hacks into your Ledger and registers on your behalf using their KYC? If someone is using a fake ID generated by AI or a deepfake to recover from companies? Twitter user @zachxbt actually made a fake KYC ID and successfully joined a couple of cryptocurrency exchanges, just like ragpools and scammers do to withdraw their money. They didn’t release the seed to the public, but they did show a new way of attacking how they could be restored and join the platforms.”

Use of AI by Cryptocurrency Platforms

More and more crypto projects are trying to integrate artificial intelligence technologies. The methods used for this are different. Very often platforms mention AI just for marketing purposes, while fundamentally there is nothing behind the projects. The schemes used are quite simple. Most often, this is a mention of some name that is well known, for example, “ChatGPT” or “AI”.

However, this does not interfere with fundamentally strong projects. For example, 4 cryptocurrencies from the “Top AI & Big Data Tokens” section are in the top 100 by capitalization according to CoinMarketCap. These are projects like The Graph (40th place), Render Token (50th place), Injective (69th place) and SingularityNET (95th place). In total, the capitalization of this segment of cryptocurrencies exceeds $5.4 billion.

So far, of course, it is too early to say that artificial intelligence has captured the crypto industry – there are too few applied projects, if you do not take into account fraudulent ones. But even now, the capitalization of these tokens is greater than that of Binance USD (14th place). So the potential for development is clearly there.

Chatbots, trading system automation and big data discovery are certainly important and will be one of the driving forces behind the next bull markets. However, we still have a long way to go, and we need to create more efficient products for a real “industry revolution”.

This material and the information in it does not constitute individual or other investment advice. The opinion of the editors may not coincide with the opinions of the author, analytical portals and experts.