Passkey Ví: The Security Revolution After $50 Billion in Losses

Industry Question Impossible to Answer: Where Did the $50 Billion Go?

Since 2020, cryptocurrencies have experienced a silent crisis: over $50 billion vanished from wallets advertised as “the safest.” In February 2025, the Safe (attack—a multi-signature solution trusted by the industry)—lost $1.6 billion not due to encryption vulnerabilities or outdated technology, but simply because of a basic architectural flaw: user interface takeover.

Blockchain remains perfect. Encryption remains unbreakable. But assets still disappear.

This hard truth forces the industry to ask a fundamental question: What do encrypted wallets truly protect?

On-Chain Assets, Keys in Wallets

First, most users confuse the concept of “wallet.” Your Bitcoin isn’t stored in Ledger, Ethereum isn’t stored in MetaMask. The actual encrypted assets exist on the blockchain—a vault of gold that cannot be destroyed, transparent, protected by thousands of distributed nodes.

A wallet is just a set of keys to open this vault, not the vault itself.

In the current wallet security system:

• Blockchain (vault): Decentralized, immutable, secured by mathematical consensus
• Private Key: The only key to authenticate transactions
• Public Address: Where assets are received (safe to share)
• Signed Transactions: Commands to transfer assets

The security of wallets boils down to a simple truth: assets on the blockchain are very secure, but every theft involves exposing the private key.

Four Generations of Evolution - From Mistakes to Perfection

Generation 1: Software Wallet (2009 - Present)

Encrypt keys and store locally in a 12 or 24-word mnemonic. Theoretically simple, but in practice highly vulnerable:

• Virus on the computer can scan software
• Malicious browser extensions can steal mnemonics
• User error (writing mnemonics on paper easily lost or stolen) is the biggest risk

Result: Billions of dollars lost from software wallets each year, and this number continues to grow.

Generation 2: Hardware Wallet (2014 - Present)

Physically isolate private keys inside dedicated security chips, not connected to the internet. Keys never leave the hardware or software.

But the trade-off is inconvenience: carrying USB devices, easy to lose or damage. Supply chain attacks can also install malware before the device reaches the user.

Result: High security, but low usability.

Generation 3: MPC Wallet (2018 - Present)

Split the key into multiple parts, with no single party holding the entire key. Multiple parties must cooperate to sign a transaction.

But notably: users depend on service providers. They can be hacked, disappear, or refuse service. On October 14, 2025, an MPC wallet provider was disconnected for 2 hours due to overload, preventing hundreds of thousands of users from transferring funds.

Result: Trust is replaced by dependence on humans.

Generation 4: Passkey Wallet (2024 - Present)

Complete architectural overhaul: keys are sealed inside the device’s security chip (Apple Pay, Google Pay security chip), impossible to extract, only active when the user authenticates biometrically.

No mnemonic needed. No separate hardware required. No third parties involved. Just face or fingerprint authentication.

What is Safe? Lessons from $1.6 Billion

Safe is a well-known multi-signature wallet solution trusted by millions to store assets. The February 2025 Safe attack revealed a hard truth:

All three generations of wallet solutions share a fatal flaw: although keys are stored securely (via software, hardware, or MPC), users still access them through a web interface provided by a centralized server.

• Frontend can be compromised
• DNS leaks (leading to fake websites)
• Malicious browser extensions can install malware
• Web interfaces can be perfectly phished

When hackers attacked Safe, they didn’t target the blockchain or the keys—they changed the door while everyone was watching the lock.

Like a vault of gold with an unbreakable lock, but with a door made of cardboard.

Five Common Attack Types

1. Frontend Interface Attacks

Take over the wallet interface, inject malware to automatically sign transactions and transfer assets.

2. Mnemonic Theft

Malware scans for mnemonics, social engineering tricks, or creates easily attackable mnemonics.

3. Phishing Campaigns

Clone websites 1:1, create urgent airdrops, or trick users into granting unlimited permissions.

4. Supply Chain Infection

Malware hidden in software libraries affecting millions of wallets simultaneously.

5. Physical Attacks

Stealing paper mnemonics or hardware devices.

Passkey: Security Through Architecture, Not Defense

Passkey is not a new encryption technology but a future digital identity verification system invested in by Apple, Google, Microsoft—billions of dollars. It secures billions of daily transactions—from unlocking iPhones with Face ID to logging into financial services.

How Passkey changes security:

• Biometrics: Face or fingerprint are the only access methods
• Domain Binding: Each Passkey is encrypted with a domain, making phishing mathematically impossible
• No Secret Sharing: Keys never leave the device
• Secure Chip: Keys are stored in the Secure Enclave, similar to payment chips

Complete architecture of a Passkey wallet:

Layer 1: Passkey inside the device’s secure chip Private keys are generated there, stored permanently, impossible to extract or clone.

Layer 2: Immutable frontend interface Wallet interface deployed on the blockchain, not controlled by web servers, unchangeable and tamper-proof.

Layer 3: Direct on-chain execution Transactions go straight from the device to the blockchain, without intermediary servers or API keys.

Architectural Immunity - Eliminating Attack Points

Passkey not only defends against attacks but makes most attacks impossible:

Interface attack → Impossible, as the interface resides on the blockchain, immutable Mnemonic theft → No mnemonics involved Phishing → Impossible, Passkey is domain-bound Virus or malware → Ineffective, keys are in the secure chip Supply chain attack → Interface from blockchain, independent of software supply chain

Security is not about building high walls but completely removing attack vectors.

The Crypto “Tesla Moment”

Tesla didn’t make a better gasoline engine—they eliminated gasoline entirely. Similarly, Passkey wallets don’t improve mnemonic security—they eliminate mnemonics altogether.

Timeline of adoption:

• 1-2 years: Enterprises begin large-scale adoption of Passkey; traditional wallet hacks continue to rise; insurance companies mandate Passkey use
• 3-5 years: Widespread acceptance; mnemonic phrases are considered as risky as passwordless authentication
• Future: Mnemonics disappear, like dial-up modems or floppy disks

Every technological revolution follows a pattern: resistance → acceptance → dominance. Superior technology doesn’t win by gradual improvement but by rendering old tech obsolete.

Moment of Choice

After $50 billion in losses, the crypto industry faces three paths:

• Continue repeating vulnerable architectures
• Install stronger locks on paper doors
• Embrace architectural change—adopt Passkey

Passkey wallets are not just locally optimal but a comprehensive reform.

The question isn’t whether Passkey wallets will become the standard, but when.

The crypto Tesla moment has arrived. The only question is: are you ready?