Einaras von Gravrock is CEO of CUBE3.AI, a pre-crime crypto fraud prevention platform that stops scams before they happen.
Blockchain technology is revolutionizing businesses with its promise of transparency, efficiency and security. Yet, the same features that make it appealing also create opportunities for fraud.
Industry reports show around 40% of scams “touch” crypto, and my company has found a similar number to be true for those exploiting blockchain technology. With fraud evolving faster than ever, businesses must prioritize security to protect their operations and maintain trust. Whether used for payments, employee records or smart contracts, blockchain applications require robust fraud prevention to succeed in an increasingly regulated and interconnected world.
The Evolving Threat Of Blockchain Fraud
Fraud in blockchain applications is growing, often adapting familiar methods like phishing or social engineering to exploit the technology’s unique features. Here’s how these schemes often unfold:
• Entry point: Attackers gain access through phishing emails, fake invoices or impersonated partners. A business might unknowingly process a fraudulent transaction or onboard a malicious actor.
• The transition: Once inside, fraudsters manipulate blockchain records, introduce malicious smart contracts or exploit security gaps. Because blockchain processes are automated and immutable, these actions often go undetected.
• The endpoint: The scheme concludes with financial loss, unauthorized data access or manipulated records. The decentralized nature of blockchain often makes reversing these actions extremely challenging.
As businesses adopt blockchain for sensitive applications like payments and employee records, they must recognize the risks and take proactive measures to address vulnerabilities.
Building Trust Through Security
Trust is the backbone of blockchain’s promise. To harness its full potential, businesses need to ensure their systems are secure and resilient against fraud. At the same time, the regulatory landscape is changing to keep pace with blockchain’s rapid adoption. While regulations vary globally, the focus remains on ensuring user protections and fostering transparency.
Businesses that proactively strengthen their security practices and align with industry standards can mitigate fraud risks and build trust with stakeholders and customers alike.
Lessons From Traditional Fraud Prevention
The financial sector has spent decades refining fraud prevention systems, and these lessons are highly applicable to blockchain:
• Continuous monitoring: Just as banks monitor transactions for suspicious activity, blockchain users should keep a close eye on workflows, smart contracts and data entries to detect irregularities.
• Proactive alerts: Timely notifications about unusual activity allow teams to respond quickly, minimizing potential damage.
• Collaboration: Traditional financial institutions often share insights to combat fraud collectively. I suggest blockchain businesses adopt a similar approach, working with industry peers and regulators to strengthen defenses.
These strategies highlight how lessons from traditional finance can strengthen trust and security in blockchain applications.
Practical Steps for Businesses
Businesses can take several steps to secure their blockchain applications against fraud, such as monitoring activity in real time with tools to track blockchain processes, flagging anomalies in workflows or smart contracts as they happen. (Disclosure: My company provides solutions for this, as do others.)
Staying fully informed about risks across all facets of your blockchain operations is key to effective fraud prevention. This involves not just monitoring your own assets—such as wallets and smart contracts—but also understanding the risk profiles of external stakeholders, including business partners and service providers. A thorough awareness of potential risks ensures a stronger security posture.
Best practices for achieving this include:
• Balancing pre-crime and post-crime measures: Traditional post-crime tools are critical for investigating incidents and addressing fraud after it occurs. However, they can be complemented by predictive tools that assess risks, flag potential threats and guide preventative actions before fraud materializes. This proactive layer minimizes risks and reinforces trust.
• Tailored risk thresholds: Not all businesses face the same threats. Tailoring monitoring thresholds to reflect specific operational risks and customer expectations allows organizations to act decisively—whether that’s by alerting users, blocking fraudulent actions or escalating issues.
• Addressing distinct needs: Compliance monitoring, while focused on regulatory adherence, differs from fraud prevention, which aims to detect and mitigate threats. Businesses should ensure their monitoring strategies address both objectives where relevant, without diluting the specific focus of fraud prevention tools.
Additional steps companies can take include:
• Strengthening authentication and access: Multi-factor authentication and strict access controls can help you protect sensitive systems.
• Testing smart contracts thoroughly: Regularly audit smart contracts to ensure they are secure and function as intended.
• Educating employees: Equip teams with the knowledge to recognize phishing attempts, social engineering and other fraud tactics.
• Collaborating across the industry: Share insights through industry forums and initiatives to strengthen collective security.
Securing Blockchain’s Future
Blockchain is a powerful tool for innovation, but its success hinges on trust. By addressing fraud risks head-on, aligning with emerging regulations and fostering collaboration, businesses can unlock its full potential while safeguarding their operations. From payments to employee records, ensuring security and transparency across applications will shape the future of blockchain.
Trust is the key to success—and in today’s world, trust is everything.
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