Cosmos ecosystem staked ATOM faces security risks, says web3 builder

Cosmos (ATOM) faces security risks, according to the web3 builder All in Bits (AiB). The firm identified concerns with the Liquid Staking Module (LSM) that investors interact with to stake ATOM. The firm listed a timeline, with key concerns identified by the team, including a majority of the code being written by North Korean agents and 19 months of unaudited code changes. Cosmos didn't immediately respond to FXStreet's request for comment.

ATOM trades at $4.459 at the time of writing on Wednesday, erasing part of weekly gains.

AiB uncovers security risks in ATOM staking

Web3 firm AiB warned crypto market participants of the risks associated with staking the ATOM token, the native crypto of the Cosmos Hub. Investors stake ATOM tokens to secure the network, and issues identified in the LSM could, therefore, negatively impact the Cosmos ecosystem. 

The AiB’s team highlighted concerns like an Oak Security audit revealed critical vulnerabilities that North Korean developers fixed in July 2022, and the FBI informed the leader of LSM development, Zaki Manian, of Democratic People's Republic of Korea (DPRK) involvement in March 2023. AiB key concerns include that a majority of the code for the module was written by North Korean agents, and there have been 19 months of unaudited code changes. 

The module is not a standalone part of the ecosystem, as it is interwoven with several other functions, and a security risk could potentially affect all of the staked ATOM tokens. The AiB’s team argues that the Cosmos Hub’s security and integrity could be undermined by a breach. 

ATOM risks decline if downward trend continues

ATOM trades at $4.459 on Wednesday. The native token of Cosmos could erase gains from early this week and dip to support at $4.039, the upper boundary of a Fair Value Gap (FVG) on the ATOM/USDT daily chart. This marks a nearly 10% drop in ATOM price. 

On the other side, the token currently faces resistance at the 10, 50, and 200-day Exponential Moving Averages (EMAs) at $4.589, $5.147, and $6.293, respectively. 

The Moving Average Convergence Divergence (MACD) indicator in the daily chart shows red histogram bars under the neutral line, signaling underlying negative momentum in ATOM’s price trend. 

In the same timeframe, the Relative Strength Index (RSI) stands near its neutral level of 50. 

ATOM/USDT daily chart 

A daily candlestick close above $4.676 could invalidate the bearish thesis and send ATOM to test resistance at the 50 and 200-day EMAs.