Stolen cryptocurrencies hit record $3.8 billion in 2022 as hacking activity persists

The value of stolen cryptocurrencies reached a record $3.8 billion in 2022 as hacking activity remained widespread, a new study from Chainalysis showed.

The number is up more than 15 percent compared to the $3.3 billion recorded in 2021, and a nearly eightfold increase from 2020’s $500 million, the New York-based blockchain company said Wednesday.

Decentralized finance (DeFi), which experts say is a more secure way of managing financial transactions because it relies on blockchain, was the primary target of hackers in 2022, and the trend has grown steadily over the past four years due to its popularity. so.

DeFi protocols exposed in 2022 accounted for more than 82 percent of all stolen cryptocurrencies, up from around 73 percent the year before, resulting in losses of around $3.1 billion, it said.

“DeFi is one of the fastest-growing, most compelling areas of the cryptocurrency ecosystem, largely due to its transparency,” said Kim Grauer, director of research at Chainalysis.

“But that same openness is also what makes DeFi so vulnerable – hackers can scan the DeFi code for vulnerabilities and strike at the perfect time to maximize the theft.”

The cryptocurrency industry has been going through a period of continued price decline since last year. Its market capitalization peaked at more than $3 trillion in November 2021, but has since fallen; as of Thursday, it stood at about $1.1 trillion — a drop of nearly two-thirds — according to data from CoinMarketCap.

Last year was one of the most tumultuous in cryptocurrency history, with the implosion of several major crypto companies, including Celsius, Three Arrows Capital and, most prominently, FTX, which filed for bankruptcy on November 11.

The fall of the exchange, once valued at $32 billion, rocked the entire industry, dealing a blow to those who argued for the viability of digital currencies and attracting more scrutiny from regulators over how they handle user assets.

Job losses have added to the industry’s problems. Last month, Coinbase, one of the world’s largest crypto platforms, said it was cutting 20 percent of its workforce, its third round of cuts in eight months.

In 2022, stolen assets and hacking activity were seen on a monthly basis, with March and October logging the highest values ​​to date at $732.4 million and $775.7 million, respectively, the Chainalysis study said.

Illegal activity in March was largely driven by the robbery against the mobile game Axie Infinity, while October’s value, which recorded 32 attacks, grew due to the hacks on BNB Chain and Mango Markets.

The Axie Infinity heist was linked to hackers linked to North Korea, who continued to increase their illegal activity, leading to the theft of cryptocurrency in 2022.

They were able to steal around $1.65 billion to break their own record for the highest value of digital assets stolen in a year, Chainalysis said.

That’s a nearly fourfold jump from the $429 million recorded in 2021 and significantly larger than the previous high of $522 million in 2018, it said.

This activity is lucrative: for perspective, the isolated country’s total exports were $151 million in 2021, according to data from Trading Economics.

“So, it’s not easy to say that cryptocurrency hacking is a significant part of the country’s economy,” Chainalysis said.

After DeFi, centralized services were the second most targeted platform by cryptocriminals, but by a large margin, it said.

Centralized platforms – those where digital assets are bought and sold through a third party – were the biggest targets until 2020, but fell significantly from last year, when the popularity of DeFi exploded, the study showed.

Private platforms, token protocols and personal wallets now have very marginal shares of the crypto-hacking pie, it said.