Market decline

Crypto Hacking Losses Surpass $2 Billion as Crime Evolves Amid Market Decline

Crypto-related crime has changed as the market declines this year, according to a new report from blockchain analytics company Chainalysis.

The report found that crypto lost to hacks has increased in 2022, with over $202 million stolen in the past two weeks in addition to the $1.9 billion in investor funds lost so far. end of July, an increase of 37% compared to last year.

This increase in crypto hacks comes as the industry shifted its focus to decentralized finance – or DeFi – as the value of cryptocurrencies fell around 50% in the first half of the year.

On the other hand, the money lost to scam projects and darknet markets has decreased with the broader market.

“It’s not really an option anymore, the industry needs to prioritize cybersecurity. Every day it seems there is at least one DeFi protocol that [a hacker] exploited,” said Kim Grauer, Research Director of Chainalysis.

In particular, crypto bridges that allow users to transfer cryptocurrencies from one blockchain to another have shown high rates of security vulnerabilities and targeting by hackers, accounting for the bulk of robberies.

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

Of the $1.9 billion stolen from DeFi protocols this year, North Korea-affiliated hackers such as the Lazarus Group are thought to be responsible for more than half of the total.

Grauer suggests that more software code audits, industry standardization on how projects manage and retain funds, and better investor education and disclosures to improve due diligence processes could help solidify these. vulnerabilities for the industry.

“It’s easy to forget, but that’s where we were to a less extreme extent for centralized exchange hacks a few years ago. It felt like an insurmountable industry problem,” Grauer explained.

Changpeng Zhao, founder and CEO of leading crypto exchange Binance, called the increase in DeFi hacks a growing pain for the emerging segment, tell yahoo finance two weeks ago, his company is investing “billions of dollars” in security.

Additionally, Zhao said that increased crypto regulation could “contribute to reducing the occurrence of [hacks] and also introduce more transparency in the market.”

The Chainalysis report also shows the value received by crypto scam projects and darknet markets plunged between January and July.

Illicit volumes to darknet marketplaces fell 43% compared to the same period last year. Much of this decline is linked to the April 5 closure of a major illicit site, the Hydra Market.

With a strong correlation to declining crypto asset prices according to the report, scams dropped to $1.6 billion, down 65%.

Source: Chain Analysis

Industry sources also told Yahoo Finance that the shift likely stems from how the market downturn has focused remaining investors’ interest in better vetted projects.

“We’re starting to see more development backed by big companies like Binance Labs and Avalanche Labs or venture capitalists, which means its [DeFi project] is going to have gone through a longer review process by multiple qualified teams,” said LP, the pseudonymous founder and CEO of the DeFi protocol review app, RugDoc.io.

Accordingly, LP said the recent increase in piracy also follows the trend of greater expertise with more resources to support them. “While the volume of smaller scams is lower, you now see a handful of very elite, sometimes state-sponsored hacking teams that can take down big projects for incredible amounts of money,” LP said.

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