Saturday, August 20, 2022

Crypto Hack Losses Top $2 Billion As Crime Shifts Amid Market Decline

Crypto Hack Losses Top $2 Billion As Crime Shifts Amid Market Decline


Crypto crime has changed due to the market downturn this year, according to a new report from analytics firm Chainalysis.

The report says that the number of cryptocurrencies lost in 2022 hacks increased dramatically, with more than $202 million stolen in the past two weeks, plus $1.9 billion in investor funds lost at the end of July, up 37%. more than last year. . in year

This increase in cryptocurrency hacks is due to the industry’s focus on decentralized finance – or DeFi – as the value of cryptocurrencies dropped by about 50% in the first half of the year.

On the other hand, the money lost due to fraudulent projects and darknet markets has decreased along with the wider market.

“This is no longer an option, the industry should prioritize cybersecurity. Every day it seems like [a hacker] is using at least one DeFi protocol,” said Kim Grauer, director of research at Chainalysis.

In particular, crypto bridges, which allow users to transfer cryptocurrencies from one block chain to another, have shown a high level of security vulnerabilities and hack attacks, which make up the bulk of major thefts.

Notable breeches hacks: Nomad ($190M) earlier this month, Harmony ($100M) in June, Ronin ($625M) in March, and Wormhole ($326M) early February.

Of the $1.9 billion stolen by DeFi protocols this year, North Korean hackers like the Lazarus Group are estimated to be responsible for more than half of the total.

Grauer suggests that further code changes, industry standardization of how projects manage and hold funds, and better education and work with investors to improve due diligence processes could help address these weaknesses in the industry.

“It's easy to forget, but a few years ago we weren't as extreme with the hacking of centralized exchanges. It seemed like an unsolvable problem in the industry,” Grauer explained.

Changpeng Zhao, founder and CEO of leading cryptocurrency exchange Binance, called the rise in DeFi hacks a challenge for the growing segment, telling Yahoo Finance two weeks ago that his company was investing "billions of dollars" in security.

In addition, Zhao said that stricter regulation of cryptocurrencies “could help reduce [hacks] and increase market transparency.”

The Chainalysis report also shows the value created by fraudulent cryptocurrency projects and the collapse of darknet markets between January and July.

Illegal volumes on the dark web markets are down 43% year-over-year. Much of this decline is due to the closure on April 5 of a major illegal market, the Hyrdra trading platform.

Largely due to falling cryptocurrency prices, fraud dropped to $1.6 billion, a 65% increase, according to the report.

Industry sources also told Yahoo Finance that the change is likely due to a market downturn that has shifted investor interest towards more proven assets.

“We are starting to see more developments backed by large companies like Binance Labs and Avalanche Labs or venture capital firms, which means that [the DeFi project] will go through a longer review process with multiple expert groups,” he said. LP, nickname. Founder and CEO of the RugDoc.io DeFi protocol evaluation program.

As a result, according to LP, the latest wave of hacking is following a trend of more skills and resources to support them. “Although the number of petty scams has decreased, we now see some elite groups that can close large projects, sometimes state-sponsored, for huge amounts of money,” LP said in a statement.

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