$14 Billion in Crypto Stolen in 2021

by nativetechdoctor

Scammers around the world raked in a record $14 billion in crypto in 2021, largely thanks to the rise of Defi (Decentralized Finance) platforms.

CNBC citing new data from blockchain analytics firm Chainalysis says that losses from crypto-related crimes have increased by 79% from a year earlier, due to theft and a spike in fraud. Among them, cryptocurrency fraud is the biggest crime, followed by theft. Most happen through illegal access to the systems of crypto businesses.

According to Chainalysis, Defi is an important part of the incident, as well as a warning to those involved in this emerging segment of the crypto industry. “Defi is one of the most exciting areas of the broader crypto ecosystem, offering tremendous opportunity for crypto entrepreneurs and users alike. But Defi is unlikely to reach its full potential, as the decentralization that makes it so active is also a factor that has allowed fraud and theft to spread,” Chainalysis wrote in its annual Crypto Crime report.

DeFi’s free space

Defi is the field’s rapidly growing market of electronic money, which aims to eliminate intermediaries, such as banks, from traditional financial transactions. With Defi, banks and lawyers are replaced with a piece of programmable code known as a smart contract. This contract is written on a public blockchain, like Ethereum or Solana. It executes when certain conditions are met, negating the need for an intermediary.

According to Chainalysis statistics, Defi’s transaction volume will increase by 912% in 2021. Impressive returns from decentralized tokens like Shiba Inu also fuel the “foraging fever” among Defi tokens. However, there are a lot of red flags when it comes to trading in this nascent crypto ecosystem. According to Chainalysis lead researcher Kim Grauer, one problem with Defi is that many of the new protocols being released have code vulnerabilities that hackers can exploit. 21% of all hacks in the last year took advantage of this.

Ms. Grauer told CNBC that while there are third-party companies that do code checks and publicly specify which protocols are secure, many users still choose to work with risky platforms that skip this step. , because they think they can get a bigger profit.

Crypto theft last year increased by 516% compared to 2020, amounting to $3.2 billion in crypto value. Of this total, 72% of the stolen funds were derived from Defi protocols. Fraud losses increased by 82% to 7.8 billion in cryptocurrency. More than $2.8 billion of this total came from a relatively new but very popular type of scheme called a “rug pull,” in which developers build what appear to project. legit cryptocurrencies, eventually taking investors’ money and disappearing.

Crime statistics don’t tell the whole story

Crypto-related crime may be at an all-time high, but researchers note that the growth of legitimate crypto use outstrips the growth of illicit use in France.

Transactions involving illicit addresses represent an all-time low, representing just 0.15% of the $15.8 trillion in total crypto trading volume in 2021. Chainalysis identified the funds. illegal activities based on their connection to confirmed illegal activity.

The researchers partly credit the ability to curb crypto-related crime to regulatory burgeoning legislation, as well as the legacy transparency of blockchain technologies. Unlike cash and other traditional forms of value transfer, every cryptocurrency transaction is recorded in a public ledger, with the right tools.

“Authorities have been very successful in leveraging the transparency of blockchains to investigate and prevent illegal activity,” Ms. Grauer said.

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