Opinion: Mitchell Amador, Founder and CEO of Immunefi
The best defense against Crypto’s catastrophic hacking is not the code, but the incentives. It is important to emphasize that the winnings for bugs prevent billions of losses and that if no appropriate incentives were set, these billions could have been misused and not been responsible disclosures. This protection only works if the incentives for white hats to work clearly outweigh them due to exploitation, and current market trends tilt their balance in a dangerous way.
Scaling bug bounty standards mean that reward sizes grow along with risky capital volumes. If the vulnerability could drain $10 million, the prize money should offer up to $1 million. These are life-changing incentives for security researchers to disclose rather than misuse, and are cost-effective to the protocol compared to the devastating alternatives that are hacked. This scaling approach protects the entire protocol from breakdown and ensures continuous growth in on-chain finance.
The problem is that market competition distorts these incentives. Some platforms now tie minimum-cost service plans to modest rewards, but in some cases, under $50,000. This pricing structure pressures the protocol to minimize rewards, reduce costs and create conditions for the next catastrophic hack.
Bug Bounty as a Defense Mechanism
Cork Protocol’s recent $12 million hack offers an example. The protocol had a key bug prize of just $100,000. This inconsistency creates simple economic accounts. Why do I find vulnerabilities for hundreds of hours when my capped payments are 120 times lower than my exploit value? Such mathematics does not discourage exploitation. It encourages it.
Bug Awards are key defense mechanisms that only work when tailored to risk. If the total value locked tens of millions of locked protocols are offered at five digits lower, they are effectively betting that hackers choose ethics over economics. It’s not a strategy – it’s hope.
The $1 million standard exists for reasons
Crypto’s security standards were fake throughout the $1 million moment. Makerdao has set up a $10 million bounty to show that protection is worth it. Wormhole’s $10 million payment after critical exploits solidified precedents that meaningful security needs meaningful incentives. Security researchers need a life-changing reason to choose disclosure over disruption in an industry where exploits can emit Treasury in minutes.
This scaling approach clearly worked. If a significant vulnerability can affect millions of user funds, the bounty should have a proportional reward, usually a risk of about 10% of capital. These economics ensure that the best researchers remain in ecosystems and remain willing to report vulnerabilities.
Market power is creating dangerous precedents
Competition to gain market share has led some platforms to compete on price rather than on security results. By linking to rewards that cap the platform’s fees, they create a perverse incentive structure. The protocol chooses low rewards not because risk justifies it, and pricing encourages it, but to minimize costs. This is a fundamental misconception about what a bug award is. They’re not just a cost. They are insurance contracts that their value must protect.
Related: Superrare $730,000 Exploits Was Easy to Prevent – Expert Weight
Worse, some security platforms require exclusive contracts that limit where researchers can work. Others allow re-rick after confidentiality that undermines the trust of the researcher. These practices remove social contracts that make bug prizes effective in the first place. If a skilled researcher loses confidence in the equity of the system, there are three options.
As a result, it has a chilly effect. The protocol caps rewards to reduce costs. Researchers opt out because benefits are not worth the effort. No critical vulnerabilities are detected. An exploit occurs. The protocol further reduces security budgets. It’s a death spear that doesn’t benefit anyone except the malicious actor.
Web2 warning
The similarities with Web2 bug bounty failures are troublesome. So, chronic payments and poor treatment of researchers have led many skilled white hats to abandon their public programs altogether. Crypto can’t afford to make the same mistake. It’s not when trillions of value are preparing to move Onchain and the institutions are looking closely.
Some people argue that early stage teams cannot afford big prizes. But the truth is that the cost of a successful hack always exceeds the cost of a well-consistent bug award. Losing funds is expensive. Losing trust is fatal.
The advance path requires industry adjustments
To protect your Crypto security infrastructure, you need to be aware that bug bounties work with trust and incentives. All low-cost programs undermine the social contract that keeps skilled researchers on the right side of the law.
The solution is not radical. Maintains rewards for prizes that reflect actual risk. Ensures clear and fair treatment of researchers. Resist the temptation to treat security as a cost center rather than a value driver.
Critical, platforms should stop protocol incentives and shorten their own defenses.
A decentralized economy only works if trust grows with it. If Crypto wants to continue growing with confidence from users, regulators and agencies, then it’s actually a meaningful prize system, not just paper. Crypto only thrives to the extent that its defenders are authorized to act.
Opinion: Mitchell Amador, founder and CEO of Immunefi.
This article is for general informational purposes and is not intended to be considered legal or investment advice, and should not be done. The views, thoughts and opinions expressed here are the authors alone and do not necessarily reflect or express Cointregraph’s views and opinions.
