Cryptocurrency Scams and Hacks in 2023: A $2 Billion Loss Amid Improved Security and Market Downturn

Cryptocurrency Scams and Hacks in 2023: A $2 Billion Loss Amid Improved Security and Market Downturn

Crypto News – In 2023, the cryptocurrency community faced a significant but reduced wave of financial losses due to scams, rug pulls, and hacks. According to the latest annual report from DeFi, a leading security application, the total losses amounted to nearly $2 billion. This figure represents a substantial decrease from the previous year’s staggering $4.2 billion loss, which also included the notable collapse of major entities like Terraform Labs, Celsius, and FTX, accounting for an additional $40 billion in lost funds.

This decrease in losses is largely credited to the implementation of enhanced security measures, heightened awareness within the cryptocurrency community, and a general downturn in market activity. When considering the catastrophic losses incurred from the collapse of major platforms like Terra, Celsius, and FTX, the reduction in losses appears even more significant.

The year 2023 saw the cryptocurrency market endure a bearish phase, with some major alternative cryptocurrencies plummeting by as much as 85% from their 2021 highs. However, the market has shown signs of recovery in recent months, shifting towards a more bullish stance. This market turnaround is accompanied by an improved recovery rate of stolen funds, rising to approximately 10% from a mere 2% in 2022, as reported by DeFi.

Ethereum, recognized as the most prominent blockchain in terms of active users and value locked, suffered the most, with about $1.35 billion lost in roughly 170 incidents. This high number of incidents underlines Ethereum‘s vulnerability, attributed to its extensive ecosystem and the high-profile nature of its projects. The most significant breach involved a $230 million heist in July, targeting the cross-chain platform Multichain.

Other blockchains also faced significant losses. The BNB Chain, an increasingly popular target, saw $110.12 million vanish across 213 incidents. The nascent zkSync Era network lost $5.2 million over two incidents, while Solana experienced a $1 million loss in a single attack.

Centralized platforms, including exchanges and trading platforms, were not immune to these security breaches, with losses totaling around $256 million from seven major incidents. The most substantial of these was the $122 million theft from the Poloniex exchange in November.

The report also highlighted the most prevalent methods used in these attacks. Access control exploits topped the list as the most damaging, with attackers exploiting weaknesses in the management of permissions and access rights within smart contracts or platforms. These breaches resulted in over $852 million in losses from 29 incidents.

Flash-loan attacks were the second most lucrative method for attackers, leading to $275 million in losses across 36 cases. These attacks exploit the uncollateralized loan features in decentralized finance (DeFi) platforms, allowing attackers to manipulate market prices and exploit vulnerabilities.

Exit scams also featured prominently, accounting for $136 million in losses over 263 cases. In these scenarios, rogue developers drained liquidity from tokens they issued or disappeared after securing funds from unsuspecting investors.

This year’s report from DeFi underscores the ongoing security challenges facing the cryptocurrency industry, even as it evolves and strengthens its defenses against such malicious activities.