Cryptocurrency holders and tasks suffered losses reaching a excessive of $2.8 billion, because of hacks and exploits in 2022.

Though crypto winter hit onerous in 2022, hacks and exploits within the trade resulted in $2.77 billion of funds misplaced to attackers. This was the biggest quantity exploited in a single yr since 2013, and second solely to 2012, which recorded losses of $3.36 billion primarily from the Silk Street hack.

The losses in 2022 had been 4.2% greater than in 2021, when attackers netted $2.66 billion amid the accelerating hype for cryptocurrency.

An analogous sample occurred across the first crypto winter in 2018, when hacks and exploits brought about $1.13 billion in losses, representing a rise of 256.7% from the earlier yr.

The DeFi summer time of 2020 noticed an increase in decentralized hacks and exploits

A mechanism known as ‘yield farming’ was launched in 2020, sparking the recognition of Decentralized Finance (DeFi) in what turned generally known as ‘DeFi summer’. Yield farming enabled traders to deposit cryptocurrencies right into a protocol, in trade for returns at numerous charges.

Traders poured their funds into DeFi protocols for top yield returns, which attracted the eye of malicious hackers. The interval of DeFi summer time in Q3 2020 due to this fact recorded the biggest sum of exploited funds that yr, at $0.33 billion for the quarter. 

2020 additionally marked a turning level within the sorts of protocols getting hacked. Hackers had beforehand focused centralized protocols, or extra particularly, centralized crypto exchanges. Nonetheless, most exploits since 2020 have taken place on decentralized networks. 

Hacks and exploits peaked throughout crypto’s bull market run, ranging from second half of 2021

Traits within the quantity of stolen funds every quarter, coincided with the cryptocurrency market’s cycles. At the beginning of the cryptocurrency bull market in Q2 2021, the quantity of stolen funds jumped by 357.2% quarter-on-quarter (QoQ) to $0.47 billion. Losses from hacks continued to climb within the following quarters, alongside acceleration of the crypto hype. Losses then peaked at $1.26 billion in Q1 2022 when the bull market was at its tail finish. 

The quantity of stolen funds within the remaining quarters decreased QoQ, with simply $0.40 billion exploited within the closing quarter final yr. 

Equally, through the shift from bull to bear market in 2018, the quantity of funds stolen stood at $0.73 billion within the first quarter, however persistently trended downwards within the subsequent three quarters.

This development parallels the correlation between crypto funding and market cycles, whereby funding declined in successive quarters when crypto winter arrived in 2022.

Methodology

This examine examines the quantity of funds in USD, misplaced to cryptocurrency hacks and exploits, from 2018 to 2022, primarily based on knowledge from DeFiYield’s REKT Database. For the aim of this examine, the phrases ‘hack’, ‘exploit’ and ‘attack’ had been used interchangeably. 

Should you use these insights, we’d respect a hyperlink credit score to this text on CoinGecko. A hyperlink credit score permits us to maintain supplying you with future data-led content material that you could be discover helpful.

What are cryptocurrency hacks and exploits?

Within the crypto trade, hacks and exploits seek advice from assaults that make use of vulnerabilities, flaws, or loopholes in any code or system, with a purpose to steal cryptocurrency cash or tokens. The people or teams that perform hacks and exploits are normally known as ‘hackers’. Because of such actions, cryptocurrency holders and tasks undergo losses of their funds, which can or might not be recoverable or returned. 

Strategies of hacking and exploitation embrace taking entry management, flash mortgage assaults, reentrancy assaults, oracle points, phishing and extra. 

Curious to know extra in regards to the state of crypto in 2022? Try our complete 2022 Annual Crypto Business Report, that extensively covers the whole lot from the crypto market panorama to analyzing Bitcoin and Ethereum, DeFi and NFT ecosystems, and extra!