The Rise of DeepSeek and Its Security Hazards

Author: O.xyz CEO Ahmad Shadid, CoinTelegraph; Compilation: Baishui, Golden Finance

The legend of DeepSeek clearly shows that cheaper AI models can offer breakthrough advantages. DeepSeek challenges traditional investments with low- cost, high-performance technologies. However, its rise also poses serious risks.

The most worrying thing about such models is data privacy and security. In fact, developing such advanced models at a fraction of the standard cost does promote innovation and investment prospects, but what is the cost?

Even cost-cutting AI models democratize AI development, it can create dangerous loopholes. A recent Cisco study found that the attack success rate of DeepSeek's R1 model is 100%. Simply put, the model fails to block any harmful hints. Why is security placed at a secondary position in such an innovation process?

DeepSeek sparks artificial intelligence boom in China

DeepSeek developers claim that its R1 chatbot costs only a fraction of what competitors like OpenAI. Industry insiders call this the largest AI chatbot event since November 2022. Microsoft and Amazon Web Services are taking quick action to support DeepSeek.

This progress is also accompanied by risks. DeepSeek's AI model stores user data on servers in China.

OpenAI expressed concerns about DeepSeek in a letter to the U.S. government. The 15-page letter stresses that DeepSeek's advances, especially its R1 model, are narrowing the U.S. leadership in artificial intelligence.

From a financial standpoint, DeepSeek’s announcement sparked a global panic. Technology stocks fell sharply. Nvidia, a leading chip manufacturing company, fell nearly 17% in a single day. Investors reassess the cost and competitiveness of the AI ​​industry. The market value loss reached hundreds of billions of dollars.

As risk sentiment spreads, shock waves quickly spread to other areas such as cryptocurrencies. A quick and hasty response is a key issue in itself. If AI developers want to take advantage of this low-cost development trend, we may see more models like DeepSeek emerging, sacrificing user privacy for rapid deployment.

Spillover effects on cryptocurrencies

The DeepSeek incident reveals more worrying trends in the crypto industry. Cryptocurrencies are increasingly linked to tech stocks. When DeepSeek made headlines, the crypto market was not spared either. Bitcoin, the most well- known digital asset, fell below $100,000.

Analysts also pointed out that the six-month rolling correlation between Bitcoin and the Nasdaq Composite Index rose to about 0.5. This shows that when technology stocks fall, risky assets such as Bitcoin will also fall. Therefore, the future damage to the development of mainstream technology markets will also have an impact on the crypto market.

Critics, including Smardex's Jean Rausis, insist that DeepSeek's technology is fundamentally "has nothing to do with Bitcoin." However, the widespread market panic means that any shock in the technology sector will be quickly transmitted to the crypto market. Many Bitcoin miners have entered the operation of artificial intelligence data centers, and their stock prices have fallen by 13%-18%. This decline increases the overall uncertainty of the market.

Another worrying issue is the growing number of fraud channels. Some tokens with DeepSeek as the theme or even fake AI themes have emerged and attracted the attention of investors. New investors know little about trading on decentralized exchanges and identifying plans to raise stock prices or pull up shipments.

Security risks that cannot be ignored

Security researchers point out that the DeepSeek R1 iOS app uses outdated encryption technology. These flaws put users at risk of cyber attacks and data breaches.

This cost reduction can make the system vulnerable to manipulation and abuse. Low-cost AI models may serve the interests of foreign governments, which cast a shadow on their adoption.

Such security risks require urgent attention from enterprises and regulators. U.S. officials are concerned that sensitive consumer data is stored on servers in China. Regulators may implement stricter data protection standards to maintain market confidence. Industry experts also have controversy over the long-term impact of DeepSeek. Some believe that its cost-effectiveness can drive the development of the entire field of artificial intelligence.

They see lowering training costs as an opportunity to drive innovation and increase competition. This could lead to wider adoption of AI tools and lower costs. However, the security defects have not been resolved. Cheaper models can put users at risk of data breaches and cyber attacks, which masks potential benefits.

What will happen in the future?

As regulators and industry leaders step in to review these issues, the future of AI depends on how we manage these security risks. While we drive innovation, we must demand higher standards of data protection.

The DeepSeek case reminds us that breakthroughs in efficiency must be strongly guaranteed. The choices made now will determine the future of AI and consumer data protection. The debate over cheaper, faster, but more risky technologies is far from over and will continue to impact the tech and crypto spaces in the coming years.