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Cheaper, faster, riskier — The rise of DeepSeek and its security concerns

Opinion by: Ahmad Shadid, CEO of O.xyz

The DeepSeek saga made it abundantly clear that cheaper AI models can offer breakthrough advantages. DeepSeek challenges traditional investments with low-cost, high-performance technology. Yet its rise brings serious risks. 

The most concerning aspects of such models are data privacy and security issues. The fact that such advanced models can be developed at a fraction of the standard expense does boost innovation and investment prospects, but at what cost?

Cost-cutting AI models can create dangerous vulnerabilities, even if they democratize AI development. A recent Cisco study found that DeepSeek’s R1 model had a 100% attack success rate. In simple terms, the model failed to block a single harmful prompt. Why does security take a backseat during such innovation?

DeepSeek sparks AI frenzy in China 

DeepSeek developers claim that its R1 chatbot costs a fraction of what rivals like OpenAI spend. Industry voices labeled this as the biggest AI chatbot story since November 2022. Microsoft and Amazon Web Services moved quickly to support DeepSeek.

This progress comes with risks. DeepSeek’s AI model stores user data on servers in China. Chinese law forces companies to share data with state agencies. This policy may allow the Chinese government to harvest US consumer data.

OpenAI raised concerns over DeepSeek in a letter to the US government. The 15-page letter highlighted that DeepSeek’s advancements, particularly with its R1 model, are narrowing the US lead in AI. 

From a financial viewpoint, DeepSeek’s announcement triggered a global panic. Tech stocks dropped sharply. Nvidia, a leader in chip manufacturing, lost nearly 17% in a single day. Investors reevaluated the cost and competitiveness of the AI industry. The loss in market value reached hundreds of billions of dollars. 

As risk sentiment spread, the shockwaves moved quickly into other sectors like crypto. The fast and hasty reaction itself is a critical concern. If AI developers want to cash in on this low-cost development trend, we might see more models like DeepSeek emerge that sacrifice user privacy for the sake of rapid deployment. 

The spillover effects on crypto

The DeepSeek saga revealed a more concerning trend for the crypto industry. Cryptocurrencies have grown closely linked with tech stocks. When DeepSeek hit the headlines, the crypto market was not spared. Bitcoin (BTC), the most prominent digital asset, fell below $100,000. 

Analysts also noted that Bitcoin’s six‐month rolling correlation with the Nasdaq Composite rose to about 0.5. This indicates that risk assets like Bitcoin follow suit when tech stocks falter. So, future developments that damage the mainstream tech market can also take a toll on the crypto market. 

Critics, including Jean Rausis of Smardex, maintain that DeepSeek’s technology “has nothing to do with Bitcoin” on a fundamental level. The prevailing market fear, however, meant that any shock in the tech sector transmitted quickly to the crypto market. Many Bitcoin miners had moved into AI data center operations and saw shares decline by 13%–18%. This drop added to the overall uncertainty in the market.

Another concern is the increasing avenue of scams. Several DeepSeek-themed or even fake AI-themed tokens emerged and captured investors’ attention. New investors would know very little about trading on decentralized exchanges and identifying pump-and-dump or rug-pull schemes. 

Security risks that can’t be ignored 

Security researchers pointed out that the DeepSeek R1 iOS app uses outdated encryption. Such flaws expose users to the risk of cyberattacks and data breaches. 

This cost-cutting can leave the system vulnerable to manipulation and misuse. The possibility that a low-cost AI model might serve foreign state interests casts a long shadow over its adoption.

Recent: OpenAI expects to 3X revenue in 2025 but Chinese AI firms are heating up

Security risks of this nature require urgent attention from companies and regulators alike. US officials worry about the storage of sensitive consumer data on Chinese servers. Regulators may impose stricter data protection standards to safeguard market confidence. Industry experts also debate the long-term influence of DeepSeek. Some argue that its cost-efficiency could push the entire AI sector forward. 

They see lower training costs as an opportunity to drive innovation and increase competition. This could lead to broader adoption of AI tools and lower costs. Yet the security shortcomings remain unresolved. The risk that cheaper models expose users to data breaches and cyberattacks overshadows potential benefits.

What’s ahead? 

As regulators and industry leaders step in to examine these issues, the future of AI depends on how well we manage these security risks. We must demand higher standards for data protection, even as we push for innovation. 

DeepSeek’s case reminds us that breakthroughs in efficiency must come with strong safeguards. The choices made now will shape the future of AI and consumer data protection. The debate over cheaper, faster but riskier technology is far from over and will continue to influence the tech and crypto space for years to come.

Opinion by: Ahmad Shadid, CEO of O.xyz.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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Why are prisoners being released by mistake?

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Why are prisoners being released by mistake?

👉 Click here to listen to Electoral Dysfunction on your podcast app 👈

Who is to blame for two more inmates being wrongly freed from prison? The Conservatives attempted a mic drop moment with David Lammy this week by trying to get the justice secretary to admit to it live in the House of Commons.

So why did Lammy avoid the question five times? And when 262 prisoners were released by mistake in the year to March – how is this happening every week?

At the very least, Harriet sees the saga as an opportunity for the government to sort out the prison service.

Plus Beth, Ruth and Harriet are joined by pollster Luke Tryl, and a group of voters who tell us why they’re not convinced by the prime minister so far.

So how tricky is this budget going to be for Rachel Reeves when most people’s top worry is the cost of living? Can she actually put up taxes? And will more people just end up supporting Nigel Farage and Zack Polanski?

Remember, you can also watch Beth Rigby, Harriet Harman and Ruth Davidson on YouTube.

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Mistaken prison releases could be ‘opportunity’ for justice secretary, Harriet Harman says

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Mistaken prison releases could be 'opportunity' for justice secretary, Harriet Harman says

Multiple mistaken prisoner releases could actually be an “opportunity” for David Lammy, Harriet Harman has said.

Speaking to Sky News’ Electoral Dysfunction podcast with political editor Beth Rigby, the Labour peer said the release errors are a chance for the justice secretary to “roll up his sleeves” and sort out his department.

It emerged on Wednesday that two prisoners were wrongly freed from HMP Wandsworth last week. It follows the high-profile release of migrant sex offender Hadush Kebatu from HMP Chelmsford.

Baroness Harman said this has “shone a spotlight on a systemic problem which needs to be sorted out”.

Rather than become a “ding dong” between Labour and the Tories, she said: “I think ironically it’s a bit of an opportunity for him [Lammy] to actually be able to roll up his sleeves and insist the department gets the resources and the focus it needs to sort out this problem, which is not a new problem.”

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What’s wrong with our prisons?

She added that figures showing 262 prisoners were mistakenly released in the 12 months to March 2025 is “five a week, more or less being let out early” and “we don’t even know that is the full extent”.

Mr Lammy, who is also the deputy prime minister, is under fire over his handling of the saga.

More on David Lammy

He stood in for Sir Keir Starmer at PMQs on Wednesday when he refused to answer whether any more asylum seekers had been wrongly released since Kebatu, an Ethiopian national, who was later deported.

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Lammy says he didn’t want to ‘mislead’ the Commons or public

As PMQs was ending, the story broke that Algerian sex offender Brahim Kaddour-Cherif had been released in error. It has since emerged that Mr Lammy was made aware of this overnight on Tuesday.

He has defended not revealing that he knew about the incident, saying he did not have the full details and did not want to mislead the public.

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Mr Lammy is also being criticised as following Kebatu’s mistaken release, he promised on 27 October that stronger prison checks would be introduced immediately.

Brahim Kaddour-Cherif and William Smith
Pic: Met Police/Surrey Police
Image:
Brahim Kaddour-Cherif and William Smith
Pic: Met Police/Surrey Police

But Kaddour-Cherif was released in error two days later, on 29 October, while another prisoner, William “Billy” Smith, was mistakenly released on Monday.

Smith handed himself in on Thursday, while Kaddour-Cherif is still on the run.

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Starmer says Lammy ‘setting out facts to best of his knowledge’ on prisoner releases

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Starmer says Lammy 'setting out facts to best of his knowledge' on prisoner releases

Sir Keir Starmer has said David Lammy “set out the facts” on mistaken prisoner releases “to the best of his knowledge” amid questions over what the justice secretary knew and when.

Speaking for the first time since it emerged two prisoners were wrongly freed from HMP Wandsworth, the prime minister also said the situation was “intolerable” and that he was “angry and frustrated”.

The Met Police announced on Wednesday afternoon that registered sex offender Brahim Kaddour-Cherif, an Algerian national, had been released in error on 29 October. He is still at large.

A few hours later it was revealed another prisoner, 35-year-old William “Billy” Smith, had been wrongly released on Monday – the same day he was convicted for multiple fraud offences and handed a 45-month jail term. He has since handed himself in.

Asked how the public can have confidence in the justice system, Sir Keir said: “Let me just say how angry and frustrated I am that these mistakes have been made in releasing people. They’re intolerable, and they shouldn’t be made.

“A lot of it comes from the burden and the strain on the system because of the failures of the last government. But I recognise it’s our job to step up and to fix this.”

More on David Lammy

Sir Keir went on to defend Mr Lammy’s handing of the saga, which comes a week on from the mistaken release of Ethiopian sex offender Hadush Kebatu, who has since been deported.

Mr Lammy declared on 27 October that stronger prison checks in light of the Kebatu fiasco would come into force immediately.

But on Thursday, he said those checks were not in place when Kaddour-Cherif was released two days later.

Asked whether he was being truthful last week or on Thursday, Sir Keir said: “David Lammy can speak for himself on that.

“I’m absolutely clear that he’s setting out the facts, to the best of his knowledge and that’s the right thing for him to do.

“But whatever the checks, it’s intolerable. So, we have to make sure that whatever changes are needed are made.”

Government sources have said the mistakes that triggered the release of Kaddour-Cherif happened at the end of September, before the new regime was put in place.

Meanwhile on Thursday night, the Ministry of Justice (MoJ) announced the rollout of “cutting-edge technology to more prisons” in order to reduce human error and modernise “the archaic processes that have led to mistakes”.

“These measures will build on the tough new checks that were brought in last month, and ensure governor oversight of all releases,” the MoJ said.

Mr Lammy, who is also the deputy prime minister, is facing further criticism for failing to reveal that he knew of Kaddour-Cherif’s release during PMQs on Wednesday, when he was filing in for Sir Keir who is at the COP summit in Brazil.

He was asked repeatedly by Tory leader Kemi Badenoch whether any more asylum seekers had been wrongly released since Kebatu and refused to answer the question. The news broke at the end of PMQs.

On Thursday, Mr Lammy said he did not have all the details in the morning and did not want to mislead the public.

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Lammy: didn’t want to mislead House on prisoner release

He told broadcasters: “I took the judgment that it is important when updating the House and the country about serious matters like this, that you have all of the details.

“I was not equipped with all of the detail, and the danger is that you end up misleading the House and the general public.

“So that is the judgment I took. I think it’s the right judgment.”

But shadow justice secretary Robert Jenrick said: “David Lammy has either lied or has absolutely no clue what’s going on in his department.

“How can the public have confidence in the justice secretary when he can’t establish a timeline of events or answer basic questions?”

Kaddour-Cherif was serving a sentence at HMP Wandsworth for trespass with intent to steal, but had previously been convicted for indecent exposure.

It is understood he is not an asylum seeker but is in the process of being deported after he overstayed his visa.

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