DeFi is a crucial sector that has revolutionized finance. Yet, it’s an extremely vulnerable sector due to its decentralized mode of operations and openness. It leaves the space susceptible to scammers and criminals who use the industry for selfish gains.
Hacking and money laundering are the two most common illicit activities in the DeFi space. Based on the Chainalysis report, these crimes have skyrocketed over the last few years.
Rate of Funds Theft and Money Laundering Rapidly Increasing
Chainalysis, the famous DeFi analytic, discloses that illegal activities like money laundering and hacking have risen steadily in the nascent industry. Based on the report, the total amount recorded from illegal activities neared $2.5B in 2022.
So far, the two significant hacks recorded are the Ronin Bridge and the Wormhole protocol. These two protocols lost their funds to hackers to the tune of over 500 million worth of tokens. As per the document, the two hacks increased the value of tokens lost due to this manipulation since 2021.
In 2021, various crypto platforms and DeFi protocols became a focal point for cyber attackers. Between 2021 and now, the crypto value was stolen amounts to nearly $1.5B, based on the report. However, the bulk of the funds was catered away in 2021, even though various crypto platforms had lost funds since 2020.
DeFi Protocols Accounted for 97% of Total Lost Funds
The report indicates that DeFi platforms are responsible for 97% of $1.68B funds catered away so far in 2022. Most of the funds were linked to different hacking entities tied to North Korea.
Chainalysis also states that 2022 is the biggest year yet, for virtual currency hackers from North Korea. They have succeeded to cater away with over $800 million by hacking different crypto protocols.
While DeFi platforms have lost a vast amount of funds, they have also been used to launder money. They have a share of the funds sent from illegal addresses since 2020.
As per Chainalysis, decentralized platforms received over 69% of illicit funds from different addresses relating to criminality in 2022. It is 50% more than illicit funds received the year before.
Several security firms are springing up different strategies to fight scams and illicit activities in the crypto space. Regulators across the globe have also passed reporting laws to protect investors, given the number of funds lost to these malicious players.
Recently, Chainalysis collaborated with a Wyoming security outfit to curb cybercrimes and scams.