North Korean Hackers Prey on Decentralized Protocols: Why DeFi Remains a Soft Target

Decentralized finance keeps getting punched in the face—and North Korea’s cyber-army is holding the gloves.

The Weakest Link

Open-source code, anonymous teams, and lightning-fast innovation make DeFi protocols irresistible targets for state-sponsored hackers. While Wall Street spends millions on cybersecurity, crypto projects often rely on ‘community audits’—a polite way of saying ‘hope for the best.’

Liquidity Heists 101

Lazarus Group and other DPRK-linked actors exploit smart contract vulnerabilities like clockwork. Flash loans? Bridge exploits? They’re not hacking—they’re just taking what the protocol’s own logic gives them. (Bonus irony: some stolen funds allegedly fund nuclear programs—making crypto traders unwitting weapons dealers.)

The Compliance Mirage

Regulators keep barking about KYC, but North Korea laughs all the way to the frozen Bitcoin. When chainalysis reports another nine-figure haul, ask yourself: why would hackers target slow, monitored banks when DeFi offers self-service robbery?

Until ‘code is law’ meets ‘law is law,’ expect more nine-figure heists—and more VC-funded projects pretending it’s ‘just a bug.’

The Smart Contract Illusion: Secure Code, Insecure Teams

For all the money and talent poured into smart contract security, most DeFi projects still fail the basics of operational security. The assumption seems to be that if the code has passed an audit, the protocol is safe. That belief is not just naive—it's dangerous.

The reality is that smart contract exploits are no longer the preferred method of attack. It’s easier—and often more effective—to go after the people running the system. Many DeFi teams have no dedicated security leads, opting to manage enormous treasuries without anyone formally accountable for OPSEC. That alone should be cause for concern.

Crucially, OPSEC failures aren’t limited to attacks from state-sponsored groups. In May 2025, Coinbase disclosed that an overseas support agent—bribed by cybercriminals—illegally accessed customer data, triggering a $180–$400 million remediation and ransom limbo. Malicious actors made similar attempts on Binance and Kraken. These incidents weren’t driven by coding errors—they were borne from insider bribery and frontline human failures.

The vulnerabilities are systemic. Across the industry, contributors are commonly onboarded via Discord or Telegram, with no identity checks, no structured provisioning, and no verifiably secure devices. Code changes are often pushed from unvetted laptops, with little to no endpoint security or key management in place. Sensitive governance discussions unfold in unsecured tools like Google Docs and Notion, without audit trails, encryption, or proper access controls. And when something inevitably goes wrong, most teams have no response plan, no designated incident commander, and no structured communication protocol—just chaos.

This isn’t decentralization. It’s operational negligence. There are DAOs managing $500 million that WOULD fail a basic OPSEC audit. There are treasuries guarded by governance forums, Discord polls, and weekend multisigs – open invitations for bad actors. Until security is treated as a full-stack responsibility—from key management to contributor onboarding—Web3 will keep leaking value through its softest layers.

What DeFi Can Learn from TradFi Security Culture

TradFi institutions are frequent targets of attacks from North Korean hackers and beyond — and as a result, banks and payment companies lose millions each year. But it’s rare to see a traditional financial institution collapse, or even pause operations, in the face of a cyberattack. These organizations operate on the assumption that attacks are inevitable. They design layered defenses that reduce the likelihood of attacks and minimize damage when exploits do occur, driven by a culture of constant vigilance that DeFi still largely lacks.

In a bank, employees do not access trading systems from personal laptops. Devices are hardened and continuously monitored. Access controls and segregation of duties ensure that no single employee can unilaterally MOVE funds or deploy production code. Onboarding and offboarding processes are structured; credentials are issued and revoked with care. And when something goes wrong, incident response is coordinated, practiced, and documented — not improvised in Discord.

Web3 needs to adopt similar maturity, but adapted to the realities of decentralized teams.

That starts with enforcing OPSEC playbooks from day one, running red-team simulations that test for phishing, infrastructure compromise, and governance capture — not just smart contract audits — and using multi-signature wallets backed by individual hardware wallets or treasury management. Teams should VET contributors and perform background checks on anyone with access to production systems or treasury controls — even in teams that consider themselves fully 'decentralized.'

Some projects are starting to lead here, investing in structured security programs and enterprise-grade tooling for key management. Others leverage advanced Security Operations (SecOps) tooling and dedicated security consultants. But these practices remain the exception, not the norm.

Decentralization Is No Excuse for Negligence

It’s time to confront the real reason many Web3 teams lag on operational security: it is difficult to implement in decentralized, globally distributed organizations. Budgets are tight, contributors are transient, and cultural resistance to cybersecurity principles, which are often misperceived as "centralization," remains strong.

But decentralization is no excuse for negligence. Nation-state adversaries understand this ecosystem. They’re already inside the gates. And the global economy is increasingly reliant on on-chain infrastructure. Web3 platforms urgently need to employ and adhere to disciplined cybersecurity practices, or risk becoming a permanent funding stream for hackers and scammers seeking to undermine them.

Code alone will not defend us. Culture will.