Crypto theft in 2021 highest in 10 years; over $12B lost in security breaches, frauds

The most popular method of crypto theft was the infiltration of crypto-exchange security systems.

In August this year, hackers stole over $600 million in Ethereum and other cryptocurrencies reportedly from Poly Network. (Image: pexels.com)

2021 was a record year for crypto attacks as not just the number of incidents including breaches and frauds but also the amount stolen in cryptocurrencies was highest in the past decade, indicating a parallel growth of crypto crime with the global crypto market. Across 76 such incidents, $4.25 billion in cryptos was stolen in 2021 — highest during the 2011-21 period, according to a report by the crypto transaction analysis and monitoring platform Crystal Blockchain. Overall, 226 incidents involving 120 security attacks, 73 decentralised finance (DeFI) protocol exploits, and 33 fraudulent schemes were reported during the said period with a total of around $12.1 billion in cryptos stolen.

The second-highest loss in cryptos was recorded in 2019 when $3.5 billion was taken away in 26 different incidents. In 2020, this was reduced to $1.49 billion in 31 incidents. The most popular method of crypto theft was the infiltration of crypto-exchange security systems. “The most notable type of attack is security breaches in the internal security systems of a cryptocurrency entity, whereby illegal access is gained to the hot wallets belonging to the crypto service,” the report noted. Back in 2018, Japanese crypto exchange Coincheck had reported around 523 million of its NEM coins worth over $500 million stolen in a security breach. In August this year, hackers stole over $600 million in Ethereum and other cryptocurrencies reportedly from Poly Network which is a cross-chain DeFi platform that lets users transfer coins through different blockchains. However, the entire amount was returned by hackers later.

The biggest share in the stolen $12.1 billion between January 2011 and December 2021 was $7.12 billion stolen through scams followed by $3.18 billion taken away through security breaches, and $1.76 billion via DeFi hacks. “DeFi hacks will continue increasing, while the DeFi industry continues building better security systems and hackers continue to do their best to break these systems,” Crystal Blockchain said.

Also read: Cryptocurrency in 2022: Top trends likely to keep crypto space buzzing in new year

In terms of the regions with the highest number of incidents, the US topped the tally. Since the beginning of blockchain’s existence, US-based crypto services have been targeted a whopping 13 times. However, in terms of value, China witnessed the biggest crypto attacks. This was mostly due to the PlusToken Ponzi scheme of 2019 that accounted for $2.9 billion and the related WoToken scam last year that took in around $1 billion worth cryptos. Apart from the US and China, the other most common locations for exchange security breaches were the UK, South Korea, and Japan.

“While it is challenging to completely prevent breaches of security systems, particularly in relation to hot wallets, it is possible for exchanges to have proper insurance for special cases, an in-house security team, blockchain analytics software, and back-up reserves that are equivalent to the amount of crypto held in online storage,” the company added.

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