Crypto Industry Urged to Adopt Structured Bounty Programs to Combat Hackers

Bloomberg reporter Emily Nicolle argues that structured bounty programs are a better alternative to chaotic negotiate-after-the-fact approaches in combating crypto hackers.

The case for this is exemplified by a recent hack on the Liquid Network, where attackers stole $320 million in Bitcoin and returned most of it after a public blockchain negotiation. However, Nicolle frames this outcome as a troubling precedent, with the attackers effectively setting their own compensation for finding a vulnerability and leveraging the threat of permanent fund loss as a negotiating tool.

Nicolle distinguishes between three categories of hackers: black hats (criminals who steal and disappear), white hats (ethical security researchers who report vulnerabilities through proper channels), and gray hats (those operating in a murky space between hero and villain). She argues that the crypto industry should not be comfortable with the arrangement, where the line between 'vulnerability disclosure' and 'extortion' gets blurry.

Nicolle advocates for structured bug bounty programs, which create formal channels for security researchers to report vulnerabilities in exchange for predetermined rewards. The infrastructure for this already exists, with Immunefi reporting cumulative payouts exceeding $143 million by July 2026. However, Nicolle notes that the math creates a perverse incentive structure, where retroactive negotiations reward aggressive behavior and structured programs need bounty amounts large enough to compete with potential exploitation.

This issue matters beyond the Liquid Network hack, as regulators worldwide focus on digital assets and distinguish between legitimate security research and criminal exploitation. Projects investing in robust bounty programs create a clearer legal framework, making it harder for exploiters to claim they were just 'helping' when draining funds from a protocol.