DeFi Has Become Main Crypto Crime Arena

Crystal Blockchain, an analytics firm, recently revealed that since 2011, the hacks and scams that have occurred in the crypto market have compromised a whopping $14.5 billion.

It further said that the decentralized finance (DeFi) ecosystem had just become the new favorite target of these attackers.

Attention towards DeFi

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A total of 167 hacks have occurred on different DeFi protocols in the last 11 years and centralized exchanges have seen 123 security breaches.

The breaches on centralized platforms saw a total of cryptocurrencies worth $3.2 billion stolen, while DeFi projects that were exploited suffered losses worth $4 billion.

Since last year, the attention of hackers have moved towards decentralized finance protocols. There have been 20 hacks that have already happened on decentralized projects more than centralized ones.

According to the report, the top 10 hacks that occurred on DeFi protocols saw a total of $2.5 billion stolen from them.

Reason for increase

The director of blockchain data and intelligence at Crystal, Nick Smart said that the primary reason for the increase in attacks on DeFi projects was because of the rapid growth the sector has seen.

Even though most of the projects that are launched in the market have not been sufficiently tested, centralized exchanges have become more conscious of their security.

This is because regulators are paying more attention to them and there is also a security demand from consumers.

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Smart said that nothing can be considered un-hackable; it is possible to hack everything with enough talent, time and creativity.

He added that there were some hacking groups, such as Lazarus, the state-backed operation from North Korea, that were dedicated to exploiting such opportunities.

According to the report, until 2021, the most popular technique for crypto-theft was compromising the security systems of crypto exchanges, but it has now moved to DeFi.

Financial damage

The report further revealed that financial damage in centralized hacks had come down significantly. The largest ever hack in this space occurred in 2018.

This was when the Coincheck platform had been compromised and NEM tokens worth $535 million had been stolen.

As for the biggest attack in the DeFi space, it occurred back in March on the Ronin network, which lost more than $650 million worth of tokens stolen.

These were stolen from the popular game Axie Infinity and the Tornado Cash mixer was used for laundering the funds.

The first half of 2022 saw the service get back almost 350,000 ether tokens, which Crystal said was more than half of what it had lost through the mixer.

Other than hacks, there have also been fraudulent schemes in the crypto space since 2011. This has resulted in almost $7.3 million being stolen.

Rug pulls are also a kind of crypto crime that has been happening in the industry. This is when the founders of the project run away with the invested money, or dump the tokens they created.

These have become the most popular kind of fraud this year.