Cryptocurrency hacking continues to rise
Syed Rahman, crypto specialist at financial crime lawyers Rahman Ravelli, considers the latest statistics.
Last year was the biggest year for crypto hacking, with $3.8 billion stolen from cryptocurrency businesses.
A report by blockchain analysts Chainalysis shows that 2022 continued the previous year’s trend of decentralised finance (DeFi) being the target most attractive to hackers.
Attacks on DeFi protocols (the set of codes that govern how digital assets are used on a blockchain network) accounted for 82.1% of all cryptocurrency stolen by hackers – a total of $3.1 billion. This was up from the 2021 DeFi figure of 73.3%.
Of the $3.1 billion, 64% came from cross-chain bridge protocols. These enable users to move their cryptocurrency from one blockchain to another. This is usually achieved by locking the user’s assets into a smart contract on the original chain and then minting equivalent assets on the second chain.
Such a practice, however, can be attractive to hackers. Any mistakes in the underlying smart contract code could be recognised and exploited by those looking to make illegal gains.
The transparency of DeFi has made it one of the fastest-growing areas of cryptocurrency. Its rise in popularity comes in the wake of a number of crypto-related scandals which were due, at least to some degree, to a lack of transparency regarding the activities of centralised crypto businesses. Yet while transparency is part of DeFi’s attraction, it is also what makes it appealing to hackers. Hackers will assess DeFi code for vulnerabilities and then conduct their activities at a time that can maximise their potential illegal gains.
While DeFi is seen as one of the newest and most exciting developments in cryptocurrency, it is also a reminder of the dangers that have always existed in this rapidly-evolving sector. With more and more potential users looking to enter the crypto market, it is inevitable that crypto-related hacking will continue to increase heavily in the immediate future.
