Crypto Hacking Losses Halved in 2023: A Surprising Turn

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Funds stolen
by hackers from cryptocurrency platforms fell by over 50% in 2023 compared to
the previous year. However, the number of individual hacking incidents rose,
indicating that hacking remains a significant threat for crypto investors.

In 2022,
hackers stole a record $3.7 billion from crypto platforms. But, according to a
new report from the blockchain analytics firm Chainalysis, in 2023, that
figure dropped to around $1.7 billion, representing a decrease of 54%.

The main
driver of this drop was a major decline in decentralized finance (DeFi)
hacking. After exploding in 2021 and 2022, with over $3 billion stolen in each
year, funds stolen from DeFi protocols fell by nearly 64% to $1.1 billion in
2023.

Despite
this overall drop, Chainalysis reported that the number of individual crypto
hacking incidents grew from 219 in 2022 to 231 in 2023. It is worth emphasizing
that the total value of stolen assets has remained at record levels for the
third year in a row. It was clearly below $1 billion in previous years,
exceeding this threshold only once in 2018.

“There’s
been a worrying trend in the escalation of both the frequency and severity of
attacks within the ecosystem,” Mar Gimenez-Aguilar, the Lead Security Architect
and Researcher at our partner Halborn, commented for Chainalysis.

The numbers
from the Chainalysis report confirm the independent data of the security app
De.Fi, which informed at the end of December that the total value of lost funds
reached almost $2 billion.

Hacks in DeFi

There were
also several large hacks of major DeFi protocols in 2023, including $197
million stolen from Euler Finance in March and $73 million taken from Curve
Finance in July during a month that saw 33 total hacks.

“Euler
Finance, a borrowing and lending protocol on Ethereum, experienced a flash loan
attack, leading to roughly $197 million in losses,” the report commented.

Chainalysis
worked with the blockchain security firm Halborn to analyze the attack types behind
DeFi hacks in 2023. They found that both on-chain vulnerabilities like code
exploits and off-chain issues like compromised private keys drove losses.
On-chain hacks accounted for most of the losses overall, but the share from
off-chain hacks rose later in the year.

While the
drop in DeFi hacking is a positive sign, Chainalysis cautioned that it may be
partly tied to lower activity and fewer targets, rather than just better
security. It advised DeFi platforms to continue improving security practices
both on and off-chain even during slower market periods.

With
hacking incidents still rising in 2023 despite fewer losses, cyber threats
remain a key issue facing the crypto industry. Companies and protocols will
need to stay vigilant to prevent hackers from capitalizing on any
emerging opportunities.

“Although
the total amount stolen from crypto platforms in 2023 was down significantly
from prior years, it is clear that attackers are becoming increasingly
sophisticated and diverse in their exploits,” the report concluded.

Biggest Hacks of 2023: Poloniex
and Atomic Wallet

The year
2023 witnessed some of the biggest cryptocurrency exchange hacks in history.
Chief among them were the attacks on Poloniex and Atomic Wallet, which together
resulted in losses totaling over $220 million.

In
November, hackers exploited a vulnerability in Poloniex’s hot wallet
infrastructure to steal approximately $120 million worth of assets. According
to reports from blockchain analytics firms, the hack prompted Poloniex to take
its wallet offline for urgent maintenance and security upgrades.

Before
that, in June, Atomic Wallet was breached in an incident that enabled the theft
of $100 million in cryptocurrencies
. Atomic Wallet developers revealed that the security incident impacted less than 1% of active monthly users.
However, the scale of the losses ranked it among the major exchange hacks of
2023.

Funds stolen
by hackers from cryptocurrency platforms fell by over 50% in 2023 compared to
the previous year. However, the number of individual hacking incidents rose,
indicating that hacking remains a significant threat for crypto investors.

In 2022,
hackers stole a record $3.7 billion from crypto platforms. But, according to a
new report from the blockchain analytics firm Chainalysis, in 2023, that
figure dropped to around $1.7 billion, representing a decrease of 54%.

The main
driver of this drop was a major decline in decentralized finance (DeFi)
hacking. After exploding in 2021 and 2022, with over $3 billion stolen in each
year, funds stolen from DeFi protocols fell by nearly 64% to $1.1 billion in
2023.

Despite
this overall drop, Chainalysis reported that the number of individual crypto
hacking incidents grew from 219 in 2022 to 231 in 2023. It is worth emphasizing
that the total value of stolen assets has remained at record levels for the
third year in a row. It was clearly below $1 billion in previous years,
exceeding this threshold only once in 2018.

“There’s
been a worrying trend in the escalation of both the frequency and severity of
attacks within the ecosystem,” Mar Gimenez-Aguilar, the Lead Security Architect
and Researcher at our partner Halborn, commented for Chainalysis.

The numbers
from the Chainalysis report confirm the independent data of the security app
De.Fi, which informed at the end of December that the total value of lost funds
reached almost $2 billion.

Hacks in DeFi

There were
also several large hacks of major DeFi protocols in 2023, including $197
million stolen from Euler Finance in March and $73 million taken from Curve
Finance in July during a month that saw 33 total hacks.

“Euler
Finance, a borrowing and lending protocol on Ethereum, experienced a flash loan
attack, leading to roughly $197 million in losses,” the report commented.

Chainalysis
worked with the blockchain security firm Halborn to analyze the attack types behind
DeFi hacks in 2023. They found that both on-chain vulnerabilities like code
exploits and off-chain issues like compromised private keys drove losses.
On-chain hacks accounted for most of the losses overall, but the share from
off-chain hacks rose later in the year.

While the
drop in DeFi hacking is a positive sign, Chainalysis cautioned that it may be
partly tied to lower activity and fewer targets, rather than just better
security. It advised DeFi platforms to continue improving security practices
both on and off-chain even during slower market periods.

With
hacking incidents still rising in 2023 despite fewer losses, cyber threats
remain a key issue facing the crypto industry. Companies and protocols will
need to stay vigilant to prevent hackers from capitalizing on any
emerging opportunities.

“Although
the total amount stolen from crypto platforms in 2023 was down significantly
from prior years, it is clear that attackers are becoming increasingly
sophisticated and diverse in their exploits,” the report concluded.

Biggest Hacks of 2023: Poloniex
and Atomic Wallet

The year
2023 witnessed some of the biggest cryptocurrency exchange hacks in history.
Chief among them were the attacks on Poloniex and Atomic Wallet, which together
resulted in losses totaling over $220 million.

In
November, hackers exploited a vulnerability in Poloniex’s hot wallet
infrastructure to steal approximately $120 million worth of assets. According
to reports from blockchain analytics firms, the hack prompted Poloniex to take
its wallet offline for urgent maintenance and security upgrades.

Before
that, in June, Atomic Wallet was breached in an incident that enabled the theft
of $100 million in cryptocurrencies
. Atomic Wallet developers revealed that the security incident impacted less than 1% of active monthly users.
However, the scale of the losses ranked it among the major exchange hacks of
2023.

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