A staggering $1.9 billion worth of cryptocurrency was stolen in hacks from various services in the first seven months of this year, marking a 60% increase from the same period in the previous year, according to a report released Tuesday from the blockchain analysis company Chainalysis.
The surge comes despite the value of many cryptocurrencies plummeting in the first half of this year. The report led to a spike in hacks on decentralized finance (DeFi) protocols. The term refers to services that attempt to replace traditional financial institutions with software that allows users to transact directly through blockchain, the digital ledger that supports cryptocurrencies.
Some of the biggest crypto hacks of 2022 were on the DeFi protocol, including a $625 million video game hack. Ronin Axie Infinity Network in March. Some of these thefts, including the Axie incident, have been since it was said for hackers linked to North Korea.
About $1 billion has been stolen from the DeFi protocol by hackers linked to North Korea so far, according to a Chainalysis report. The theft is thought to be part of a wider strategy to help generate income for the North Korean regime as it has largely been cut off from the rest of the world.
DeFi transactions, based on Ethereum blockchain technology, have rapidly exploded in popularity over the past two years. The protocol is “extremely vulnerable to hacking” due to its open source code, large pool of assets and rapid growth that can impact security best practices, according to Elliptic, a blockchain analysis company.
“This technology is relatively immature in general. This space only emerged a few years ago,” Tom Robinson, chief scientist at Elliptic, told CNN Business. “Mistakes are made, mistakes are learned from, but there are always bugs in the software. I think the problem here is that the software is the only thing that secures these assets.”
Chainalysis warns that the increase in crypto theft shows no sign of letting up even as the crypto market declines. “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,” according to the report.
Chainalysis points to two large-scale DeFi hacks, including $190 million reportedly stolen from cryptocurrency bridge provider Nomadwhich occurs after the data cut-off point for the report.
But there is also at least one silver lining in the report: Quantities lost money in cryptocurrency scamssuch as A $2 billion Ponzi scheme which was done by BitConnect founder Satish Kumbhani, 65% less than the previous year as the falling value of crypto made investment opportunities less attractive for potential victims.
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