One reason why cryptocurrencies aren’t used by a lot of people is that fraud is common in the industry.Despite the fact that the amount was already almost 50% lower than the year before, an industry analysis claims that over $3.9 billion worth of cryptocurrency was “lost” last year alone.
The former general manager of Entrepreneur First and angel investor Francois Le Nguyen lost $10,000 in Ethereum and NFTs as a result of a phishing attack on Discord.
Everyone is vulnerable if even careful investors like himself and well-known NFT players like Kevin Rose are prey to wallet hacks and con artists, Le Nguyen told TechCrunch in an interview.
I want to stop my friends and family from getting hurt because I know that one of them will eventually get hurt, he stated. While we discuss having your own keys as the newest trend in asset management, if you don’t have the means to safeguard yourself, tragedies will inevitably occur because everything you come into contact with could pose a hazard.
Le Nguyen was upset by the loss, so he and his co-founder Jake Harwood set out to find ways to make crypto transactions more secure.This project eventually became the Staging Laboratories. The firm, which employs three people full-time, revealed today that it has raised $1.1 million in a pre-seed round that was oversubscribed.
Kabir Kumar of Flourish Ventures, an investor in Staging Labs, says that recent events in the American banking industry remind us that we often take system and regulatory safeguards for granted in the TradFi [traditional finance] environment.In the cryptosphere, those safeguards are still under construction. People are obliged to protect themselves from fraud and scams in particular.
Staging labs can help in this situation. The startup’s initial goal was to develop a “SOS button” for cryptocurrency transactions, similar to the freeze option on a credit card. Yet it soon became aware of the drawbacks of this strategy: what if a user is not in close proximity to their device? Reiterating the idea, it developed a more sophisticated version dubbed Saferoot that can continuously and actively scan transactions.
Saferoot automatically moves digital assets from a wallet’s weak spot to a backup safe when there is a malicious attack.This is accomplished by stopping a transaction just after the user clicks “send” but before the funds are transferred.
Blockchain technology is thought to be immutable, meaning that once you click “confirm,” nothing can be changed. Technically speaking, that is not accurate because there is a brief period of time during which the transaction is in the pending or processing state. Thus, there is where we play, said Le Nguyen.
Saferoot isn’t specifically anticipating or spotting harmful assaults. Along with how people protect their credit cards by setting spending limitations, it instead raises an alarm when a transaction exceeds a user’s established limits. Le Nguyen wants the risk monitoring component to become “smarter” over time, though.
In order to shift the asset before the hacker can take the money, Saferoot detects a suspicious transaction, shoots it down, and sends a replacement transaction in its stead. Le Nguyen noted that arbitrage traders have utilized this strategy, so it is not particularly novel. Yet he contended that sending a transaction in a timely manner—”a very, very tough distributed systems problem”—is the company’s competitive advantage.
When referring to Harwood’s history in creating a network-distributed system for the speaker manufacturer Sonos, Le Nguyen said, “Here is where my background co-founder’s comes in.
The “in-flight” phase of a transaction is the one where Staging Labs currently steps in. The company wants to eventually focus on “pre-flight,” which is the time before a user makes a transaction, and “post-flight,” which is when funds are usually recovered and law enforcement may be called in.To build capabilities for the two later stages, the organization is already in discussions with potential partners.
Saferoot is aiming for a slightly different route to monetization, even though it seems to be a SaaS service. The company intends to charge consumers a subscription fee as well as a portion of the funds that are successfully recovered because it recognizes that fund protection is a crucial component of asset transfers.
Also, it will split profits with wallets, which are crucial gateways for the distribution of cryptocurrency services but sometimes find it difficult to make money on their own. With “dozens” of wallets, it is now in talks with one player, and a deal to work together is close.
The most recent round of funding for Staging Labs is a “party round,” which is typical for small cryptocurrency firms looking for partners, particularly during a bad market when investors are less willing to take the lead. The General Partnership, Flourish Ventures, NGC Ventures, AlphaGrep, Gaingels, scouts from a16z, Kleiner Perkins, and Greylock, as well as founders and angel investors from cryptocurrency companies ConsenSys, Coinbase, Anchorage Digital, Chainalysis, Quicknode, Merkle Science, and others, are among the lineup’s participants.