According to a report released Tuesday by blockchain analysis firm Chainalysis, a staggering $1.9 billion in crypto was stolen in hacks of various services in the first seven months of this year, a 60% increase from the same period last year.
The increase comes even though the value of many cryptocurrencies plummeted in the first half of this year. The report attributed a large portion of the rise to decentralized finance (DeFi) protocols hacks. The term refers to services that seek to replace traditional financial institutions with software that enables users to transact directly with one another via the blockchain, the digital ledger that underpins cryptocurrencies.
Some of 2022’s most significant crypto hacks used DeFi protocols, including the $625 million hack of video game Axie Infinity’s Ronin network in March. Some of these thefts, including the Axie incident, have been linked to North Korean hackers.
According to Chainalysis, over $1 billion in crypto from DeFi protocols were stolen this year!
According to the Chainalysis report, North Korean-affiliated hackers have stolen an estimated $1 billion from DeFi protocols this year. These thefts are considered part of a larger strategy to generate revenue for the North Korean regime, which has been largely cut off from the rest of the world.
DeFi transactions, which primarily use Ethereum blockchain technology, have grown in popularity over the last two years. However, according to Elliptic, a blockchain analysis firm, these protocols are “uniquely vulnerable to hacking” due to their open source code, large pools of assets, and rapid growth, which may have resulted in a lapse in security best practices.
“In general, technology is still in its infancy. This market has only recently emerged in recent years, “Elliptic’s chief scientist, Tom Robinson, told CNN Business. “Mistakes are made, and mistakes are learned from, but there are always bugs in software. I believe the issue is that the software is the only thing protecting these assets.”
Despite the drop in the cryptocurrency market, Chainalysis warns that the rise in crypto thefts shows no signs of abating. According to the report, “as long as crypto assets held in DeFi protocol pools and other services have value and are vulnerable, bad actors will try to steal them.”
Chainalysis cites two recent large-scale DeFi hacks, including the $190 million allegedly stolen from cryptocurrency bridge provider Nomad after the report’s data cutoff point.
But there is one bright spot in the report: the amount of money lost in cryptocurrency scams, such as BitConnect founder Satish Kumbhani’s $2 billion Ponzi scheme, was 65% lower than the previous year, as the falling value of cryptocurrency made it a less attractive investment opportunity for potential victims.