According to new reports from blockchain security firms Chainalysis and TRM Labs, the amount of cryptocurrency stolen by hackers declined significantly this year – the first drop since 2020.
By most estimates, cybercriminals made off with around $2 billion in stolen crypto across dozens of major breaches and cyberattacks.
A Persistent Threat, But Signs of Progress
While $2 billion is still an enormous figure, it pales in comparison to the record-breaking $3.8 billion stolen in 2022, driven largely by prolific North Korean state hackers. It also represents a notable decrease from the $3.3 billion in thefts seen in 2021.
According to analysis from blockchain intelligence firm TRM Labs, the $2 billion figure for 2023 reflects both the ongoing vulnerabilities in decentralized finance (DeFi) and the gradual security improvements made this year, even amid a bear market for crypto in the first half of 2023.
“This amount, though dispersed across various incidents, underscores the persistent vulnerabilities and challenges within the DeFi ecosystem,” TRM Labs wrote in its report. “2023 stood as a testament to both the ongoing vulnerabilities and the strides made in addressing them.”
The Biggest Crypto Heists of 2023
Though decreased from previous years, $2 billion in thefts is still a massive figure, reflecting some of the largest crypto breaches on record:
- The Ronin Bridge Hack: In March 2022, hackers exploited vulnerabilities in the Ronin Network’s code to steal over $600 million in crypto assets – the largest DeFi hack in history. The stolen funds belonged to the popular play-to-earn game Axie Infinity.
- The Mixin Hack: In August 2023, hackers breached the Mixin messaging app and made off with around $200 million in crypto, making it one of the biggest thefts of the year.
- The Euler Finance Hack: A vulnerability in Euler Finance’s overcollateralized lending protocol allowed hackers to steal nearly $200 million in crypto assets in June 2023.
- Multichain Hack: In January, bugs in router contracts on the Multichain interoperability protocol let hackers steal about $126 million.
- BonqDAO Hack: A flaw in the BonqDAO lending platform enabled a $120 million crypto heist in December 2022.
Other major crypto thefts this year included incidents at Poloniex ($114 million stolen), Atomic Wallet ($100 million), and several dozen other exploits netting tens of millions each.
What’s Behind the Decrease? Bear Market and Better Security
After reaching an all-time high in 2021, why did crypto theft decline in 2023? Experts point to a few key factors:
- The Crypto Bear Market: As crypto prices plummeted in 2023, there was less incentive for hackers to steal crypto assets that had lost significant value compared to 2021’s market peak. Lower transaction volumes also meant fewer opportunities for exploits.
- Improved Security: After record thefts in 2021-2022, many crypto projects devoted more resources to shoring up vulnerabilities, implementing bug bounties, and using established auditing procedures. This security boost helped prevent some potential exploits in 2023.
- More Sophisticated Tracking: Blockchain analytics firms like TRM Labs improved their tracking of crypto theft, making it harder for hackers to cash out stolen assets through mainstream exchanges.
- However, experts warn that the drop in crypto theft may only be temporary if security practices do not continue improving across the Web3 ecosystem.
What Does This Mean for Crypto in 2024 and Beyond?
With hackers still making off with billions in crypto assets, the DeFi space clearly remains rife with vulnerabilities even after this year’s security improvements. What might the future hold?
- Expect More High-Profile Hacks: Cybercriminals will continue targeting major weaknesses in DeFi protocols, exchanges, and wallet providers as long as these lucrative vulnerabilities persist.
- Hacks Will Become More Advanced: As security improves, hackers will likely employ more sophisticated tactics like advanced social engineering, supply chain compromises, and zero-day exploits.
- Hacking May Rise with Bull Market: If crypto prices rebound in 2024 or beyond, expect the total amount stolen to increase as well, given higher payoffs.
- Better Security is Paramount: To reduce theft, projects must invest in audits, formal verification, bug bounties, and other best practices while users must embrace security measures like cold storage and hardware wallets.
- Regulation May Help: If government oversight increases for crypto exchanges, some experts believe mandatory security standards could help curb major hacks and thefts.
Though 2023 represented progress, the crypto industry still has a long way to go in improving security and driving down theft. As adoption increases, projects and users cannot become complacent. Otherwise, 2024 may see hackers run off with record illicit gains once again.
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Key Takeaways
- After record-breaking crypto thefts in 2021 and 2022, blockchain security firms report a notable drop in 2023, with approximately $2 billion stolen.
- Major hacks like Ronin Bridge, Mixin, and Euler Finance still netted hackers hundreds of millions each.
- The crypto bear market and improved security at some projects likely contributed to the decrease.
- But billions in theft shows DeFi still faces security struggles. Sophisticated hacking may rise with an eventual bull market.
- To reduce future breaches, projects must prioritize audits, verification, and other security best practices.