Losses From Crypto Hacks

Hacks and exploits lead to financial and asset losses, they also cause unease in the overall ecosystem. Losses arising from cryptocurrency hacks jumped nearly 60% in the first seven months of the year to $1.9 billion, propelled by a surge in funds stolen from decentralized finance (DeFi) protocols, according to a blog post from blockchain analysis firm Chainalysis reported.

Traditionally the financial institutions with software allows users to transact directly with each other via the blockchain, the digital ledger that underpins cryptocurrencies.

Last year stolen funds from hacking amounted to $1.2 billion. Chainalysis noted that the trend is not likely to reverse any time soon, given the $190 million hacking of cross-chain bridge Nomad and $5 million hacking of several Solana wallets already in the first week of August.

“DeFi protocols are uniquely vulnerable to hacking, as their open-source code can be studied ad nauseum by cybercriminals looking for exploits and it's possible that protocols' incentives to reach the market and grow quickly lead to lapses in security best practices,” Chainalysis said in the blog.

Much of the funds stolen from DeFi protocols can be attributed to “bad actors” affiliated with North Korea, especially elite hacking units like Lazarus Group. Chainalysis estimates that so far this year, North Korea-affiliated groups have stolen approximately $1 billion of cryptocurrency from DeFi protocols.

Scammers may impersonate legitimate businesses and offer fraudulent crypto coins or tokens. Scams are down primarily because of the crypto downturn, but also because of the many law enforcement wins taken against scammers and the product solutions that exchanges can use to fight scamming.

With respect to crypto scams, the blockchain intelligence firm saw a sharp 65% decline through July, in line with the slump in digital asset prices. Total scam revenue in the year to July was $1.6 billion, down 65% from around $4.46 billion in the same period last year.