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DeFi risks and hacks on the rise

2021 marked two trends in the crypto sector: the massive explosion of crypto-assets and the multitude of hacker attacks that led to significant risks.

January 13, 2022 | Alex Rad

The total cryptocurrency market capitalisation fluctuated in the $1 to $3 trillion band between 1 January 2021 and 1 January 2022. During the period, the resultant market volatility and value increases attracted not only investors but also hackers.

Hackers targeted companies operating in various areas of the sector, including non-fungible token (NFT) platform providers (Vulcan Verse) digital exchanges (AcsendEX, BitMart, Boy X Highspeed, and Liquid Global), networks (EasyFi), decentralised autonomous organisations (Badger DAO), and various DeFi platforms (C.R.E.A.M. and Polygen Network). The hackers left these companies vulnerable to service disruptions, price crashes, and financial losses.

Affected companies have had to resort to different ways to mitigate and remediate the impact of such attacks. The primary concern has been to protect users´ assets and minimise losses through various means such as direct compensations, reimbursement plans, and new coin issuances. For these companies, it is important to build trust in the fledgling sector.

It is important for crypto companies to establish the hackers´ identity, whether the attacks were perpetrated by insiders, outsiders, or state-sponsored actors. Hackers use different modus operandi, including phishing, breaking into computer systems and hot wallets, as well as through ransomwares and malicious codes.

Hackers have caused an estimated $4 billion in direct losses and at least three times more in costs for networks indirectly in terms of reputation damage and loss of customers. Yet these numbers make up a fraction of the total value, an estimated $2 trillion locked in DeFi, stablecoins, NFTs, and more.

Crypto-companies attempt to ...

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