Chainalysis says Crypto Hacks Rise with DeFi the Hot Target

Blockchain analysis firm Chainalysis published a blog post in which it said that there had been a 60% increase in the losses occurring because of cryptocurrency hacks.

These had happened in the first seven months of 2022 and the losses amounted to $1.9 billion, primarily because of an increase in funds that had been stolen from various decentralized finance (DeFi) protocols.

Last year, the same period had seen funds stolen via hacking of around $1.2 billion.

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DeFi apps

Decentralized finance (DeFi) applications are financial platforms, which provide lending services denominated in cryptocurrencies, the same way traditional banks do with fiat currency.

Most of these DeFi protocols are based on the Ethereum blockchain. According to Chainalysis, it is highly unlikely that the trend will change anytime soon.

The first week of August already saw a number of Solana wallets compromised, which resulted in losses worth $5 million.

Another hack that occurred was that of Nomad and the cross-chain bridge suffered from losses worth $190 million.

According to Chainalysis, DeFi protocols have become a hot target because cybercriminals can study their open source code ad nauseum.

Moreover, the protocols are often eager to reach the masses and want to expand quickly, due to which they do not follow the best security practices.

North Korea

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The blockchain analysis firm further disclosed that most of the funds that were stolen from DeFi protocols had been taken by ‘bad actors’ associated with North Korea.

The US firm pointed to the Lazarus Group as well. It estimated that groups affiliated with North Korea had stolen around $1 billion worth of crypto from various DeFi protocols.

As far as crypto scams are concerned, the blockchain intelligence firm stated that these had seen a sharp fall of 65% through July.

This was in accordance with the slump in the prices of digital assets. The total scam revenue generated in the year ending in July was approximately $1.6 billion.

This was a drop of 65% in the same period in the previous year, when the scam revenues had been $4.46 billion.

Scammers offer fraudulent crypto tokens or coins and often impersonate legitimate entities. The director of researcher at Chainalysis, Kim Grauer, talked about crypto scams.

She said that crypto downturn was the reason behind the declining scams and also because of the law enforcement wins, combined with the product solutions being used to fight them.

Crypto market

According to CoinGecko, the capitalization of the crypto market on late Thursday was around $1.1 trillion.

This is a 50% drop from the value in the beginning of the year, when it had been around $2.35 trillion. So far, Bitcoin has seen its price drop by almost 48% and the last couple of months have seen it hovering between $20,000 and $40,000.

Chainalysis said that with the drop in price of Bitcoin since January, scam proceeds have also declined.

Not only did the proceeds fall, but the individual transfers to scams in the year also dropped to their lowest value in the last four years.