According to a blog post published on Tuesday by blockchain analysis company Chainalysis, losses from cryptocurrency thefts increased by over 60% in the first seven months of the year to $1.9 billion, driven by a surge in money stolen from decentralized finance (DeFi) protocols.
Chainalysis and Crypto Attacks
The amount of money stolen through hacking over the same period last year was $1.2 billion. DeFi applications are financial platforms that allow lending in cryptocurrencies outside of conventional banks, with many of them running on the Ethereum blockchain.
Given the $190 million attack on the cross-chain bridge Nomad and the $5 million hack of numerous Solana wallets already in the first week of August, Chainalysis highlighted that the trend is unlikely to change any time soon.
Chainalysis said in the blog that 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.
The U.S. company claimed that “bad actors” connected to North Korea, particularly renowned hacker groups like Lazarus Group, are responsible for a large portion of the money taken via DeFi protocols. According to Chainalysis’ calculations, organizations connected to North Korea have so far this year stolen roughly $1 billion in cryptocurrencies from DeFi protocols.
In keeping with the drop in the price of digital assets, the blockchain intelligence company observed a steep 65% decline in crypto frauds from January to July. The total revenue from scams in the year to July was $1.6 billion, a 65% decrease from the $4.46 billion in the comparable period the previous year. Scammers may pose as reputable companies and sell fake crypto coins or tokens.
Crypto Downturn and Market
Chainalysis’ director of research, Kim Grauer said that scams are declining primarily as a result of the crypto downturn, but they are also declining due to the numerous legal victories obtained against scammers and the product tools available to exchanges to combat fraud.
As per CoinGecko, the market capitalization of cryptocurrencies as of late Thursday was $1.1 trillion, a decline of more than 50% from the $2.35 trillion record at the start of the year. Bitcoin’s price has fallen by about 48% so far this year, and in recent months it has been ranging between $20,000 and $24,000.
As per Chainalysis, scam-related earnings have decreased along with the price of Bitcoin since January 2022. In addition to a decline in scam proceeds, 2022 saw the fewest total individual transfers to scams over the previous four years.
Chainalysis said in the report that these figures imply that fewer people than ever are victims of bitcoin fraud. One explanation for this might be that with asset prices declining, cryptocurrency scams, which frequently pose as passive crypto investment opportunities with substantial promised returns, are less alluring to potential victims.