The Rise of DeepSeek and Its Security Risks

Author: Ahmad Shadid, CEO of O.xyz, CoinTelegraph; Translated by: Bai Shui, Jin Se Cai Jing

The legend of DeepSeek clearly indicates that cheaper artificial intelligence models can provide breakthrough advantages. DeepSeek challenges traditional investments with low-cost, high-performance technology. However, its rise also brings significant risks.

The most concerning aspect of such models is data privacy and security issues. In fact, developing such advanced models for a fraction of the standard cost indeed promotes innovation and investment prospects, but at what cost?

Even though cost-cutting AI models democratize AI development, they may also create dangerous vulnerabilities. A recent study by Cisco found that the attack success rate of DeepSeek's R1 model was 100%. Simply put, the model failed to block any harmful prompts. Why is security being placed secondary in such an innovative process?

DeepSeek Sparks Artificial Intelligence Craze in China

DeepSeek developers claim that the cost of their R1 chatbot is only a fraction of competitors like OpenAI. Industry insiders have termed this the biggest AI chatbot event since November 2022. Microsoft and Amazon Web Services quickly took action to support DeepSeek.

This progress also comes with 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 emphasized that the advancements of DeepSeek, particularly its R1 model, are narrowing the United States' leading position in the field of artificial intelligence.

From a financial perspective, DeepSeek's announcement has triggered global panic. Tech stocks have plummeted significantly. Chip manufacturing giant Nvidia saw a daily drop of nearly 17%. Investors are reassessing the costs and competitiveness of the AI industry. The market value loss has reached hundreds of billions of dollars.

As risk sentiment spreads, shockwaves quickly extend to other areas such as cryptocurrencies. The rapid and hasty response itself is a key issue. 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 quick deployment.

Spillover Effects of Cryptocurrency

The DeepSeek incident reveals a more concerning trend in the cryptocurrency industry. The connection between cryptocurrencies and tech stocks is becoming increasingly close. When DeepSeek made headlines, the cryptocurrency market was not spared either. The most well-known digital asset, Bitcoin, fell below $100,000.

Analysts also pointed out that the six-month rolling correlation between Bitcoin and the Nasdaq Composite Index has risen to about 0.5. This indicates that when tech stocks decline, risk assets such as Bitcoin also tend to drop. Therefore, any future damage to the mainstream tech market will also impact the crypto market.

Critics, including Jean Rausis of Smardex, insist that DeepSeek's technology is fundamentally "not related to Bitcoin at all." However, the pervasive market panic means that any shock in the tech sector quickly transmits to the crypto market. Many Bitcoin miners have entered the AI data center operation, with stock prices dropping by 13%-18%. This decline has increased the overall uncertainty in the market.

Another concerning issue is the increasing number of scam pathways. Some tokens themed around DeepSeek or even fake AI themes have emerged and attracted the attention of investors. New investors know very little about trading on decentralized exchanges and identifying pump-and-dump schemes.

Security Risks That Cannot Be Ignored

Security researchers have pointed out that the DeepSeek R1 iOS application uses outdated encryption technologies. These vulnerabilities put users at risk of cyber attacks and data breaches.

This cost reduction may make the system susceptible to manipulation and abuse. Low-cost artificial intelligence models may serve the interests of foreign governments, casting a shadow over their adoption.

Such security risks require urgent attention from businesses and regulatory agencies. U.S. officials are concerned about sensitive consumer data being stored on servers in China. Regulators may implement stricter data protection standards to maintain market confidence. Industry experts also dispute the long-term impact of DeepSeek. Some believe its cost-effectiveness could drive the development of the entire artificial intelligence field.

They view the reduction of training costs as an opportunity to drive innovation and increase competition. This could lead to a wider adoption of AI tools and lower costs. However, security flaws remain unresolved. Cheaper models may expose users to the risk of data breaches and cyberattacks, overshadowing the potential benefits.

What will the future be like?

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

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