Hacking of projects from the field of decentralized finance appears in 99 percent of all fraudulent schemes in the cryptocurrency market in the second half of 2020, that is, this type of attack turned out to be the most popular among hackers.
These statistics were recently shared by experts from the analytical platform CipherTrace. As part of the annual report on the role of fraudsters in the life of the blockchain asset market, an exhaustive report was prepared, the most important of which we have selected in this article.
To begin with, let us remind you that the presence of hackers in the cryptocurrency industry is indeed very noticeable. One of the most striking stories of ransom hacking in blockchain assets was the hacking of the University of California, whose employees were testing the coronavirus vaccine.
The scammers were aware of the good financial situation of the institution, so they demanded a large sum from it. Otherwise, they promised to keep files important for the university locked. As a result, everything ended with the payment of 116 bitcoins, which have risen in price since the time of sending.
Fraud and cryptocurrencies
According to CipherTrace, the criminals earned $ 1.9 billion in 2020. This is noticeably less than the similar figure of $ 4.5 billion in 2019, but more than $ 1.7 billion in 2018. Most of the crypt-related criminal activity falls under the general heading of fraud and misappropriation of funds. The second most popular category, according to experts, was “break-ins and thefts.”
A large-scale fraudulent scheme with the WoToken coin, which brought hackers the equivalent of $ 1.1 billion, takes a large share in the statistics. According to the report, this was the most expensive cryptocurrency crime of 2020. The second and third places were taken by criminal activities related to the hacking of the KuCoin and Fcoin cryptocurrency exchanges, Decrypt reports.
Hackers are still one of the main problems of the digital asset market.
Decentralized finance, or DeFi, has also been particularly vulnerable to theft. And “money shake” or “ragpull” – a kind of scam of siphoning liquidity from protocols – became the dominant type of activity.
Recall that we are talking about the withdrawal by developers of most of the coins of their project from the corresponding trading pairs on decentralized exchanges, an example of which is Uniswap. Because of this, investors cannot get rid of their own cryptocurrency, and in addition, its rate collapses to zero. This scheme is mainly associated with fraudulent developers, but sometimes there are exceptions when unauthorized hackers create similar problems for projects. They find errors in the code of projects and use them for their own benefit.
The experts continue.
Half of all cryptocurrency hacks in 2020 were related to decentralized protocols – a concept that has remained virtually insignificant in all previous years. Almost 99 percent of the bulk of fraud in the second half of 2020 was related to decentralized finance. This is a pattern that eerily resembles the ICO craze in 2017.
As the amount of money in decentralized finance grows – now nearly $ 27 billion – the risks associated with the new trend also grow. The pattern was explained by CipherTrace CEO Dave Jevans.
The fear of missing out on potential profits contributes to the growth and urgency associated with participating in DeFi, but overall, decentralized finance lacks adequate security, which exposes individual investors to significant risks. When protocols launch quickly to take advantage of the hype cycle, they put investors at risk, who could fall prey to loopholes or code bugs that would be found in an in-depth security audit.
In other words, projects from the decentralized finance niche “paid” for the diluted HYIP – as many developers as possible tried to launch their projects faster without a proper review of their own code. The hype that has made the DeFi space so rapidly expanding was one of the reasons for its crash this fall. However, now the industry has recovered its positions and reached new all-time highs, so we can expect a repeat of the scenario of incredible niche growth following the example of the summer of 2020.
We believe that the attention of hackers and massive hacks is a price to pay for the creation of new technologies that can change the world. Since cryptocurrencies and blockchain are now one of the most promising areas in the finance industry, the presence of scammers is not surprising here. I would like to believe that over time, their earnings due to the improvement of various projects will decrease.