Chainalysis Discusses the Current State of Cryptocurrency Theft

The value of crypto assets that was stolen through hacking increased by more than 60 percent in just the first seven months of 2022. Given that decentralized exchanges are significantly less regulated and less likely to be subjected to inquisitive eyes, a significant portion of these assets were likely stolen from those platforms. This is the most significant disadvantage of defi protocols; because they take the concepts of cryptography extremely literally, they effectively hand over control to each individual user to do with as they choose.

When compared to the data from this year, 2021 seems like it will be a relatively quiet year. During the first seven months of this year, only $1.2 billion worth of cryptocurrency was stolen. Chainalysis mentions in its report that this trend is not likely to end any time soon and points to recent situations such as the $190 million hack on Nomad and the $5 million in crypto that was stolen from several Solana wallets during the first week of August as proof that cryptocurrency hackers are becoming more brazen in their schemes.

Chainalysis wrote the following:

It is possible that the incentives for protocols to reach the market and flourish quickly will lead to gaps in security best practices. Defi protocols are especially susceptible to hacking since their open-source code can be reviewed endlessly by cybercriminals hunting for exploits.

The analysis firm also stated in the document that a significant portion of the hacking that is being done today can be attributed not to individuals or a few bad apples here and there, but rather to organized hacking groups such as Lazarus in North Korea, which has been stealing cryptocurrency for years to fund North Korea's ever-expanding nuclear program. This was stated in reference to the fact that Lazarus has already been stealing cryptocurrency for years to fund North Korea's pace with the fast nuclear program. According to Chainalysis, North Korea is likely responsible for the theft of more than one billion dollars worth of cryptocurrency this year.

Scams involving cryptocurrencies have seen a significant decline throughout the month of July, with some estimates indicating a drop of as much as 65 percent from the previous month's total. This is one of the few pieces of positive news. The entire revenue from crypto scams in 2022 was only $1.6 billion, which is a complete and utter turnaround from the nearly $5 billion that was recorded for the same time period in 2021.

In an interview, Kim Grauer, who is the director of research at Chainalysis, provided the following explanation:

Scams have decreased, primarily as a result of the bear market in cryptocurrencies, but also as a result of the many victories that law enforcement agencies have achieved against scammers and the product solutions that exchanges may employ to combat scamming.

As Crypto Values Fall, Scammers Will Follow

Additionally, the business stated in their study that:

Based on these figures, it appears that a historically low amount of people are falling for bitcoin frauds. One reason for this could be because when asset prices continue to decline, potential victims find cryptocurrency scams, which often promote themselves as chances for passive investing in bitcoin with big profits, less appealing.