The Biggest Year for Hacking in DeFI Space: Will we see the end of it in 2023?
A lot of unwanted records were etched in the DeFI Space throughout the gloomy 2022 but another one might be added up as it became the biggest year for hacking. Cybercrime has been a major hurdle in the DeFI space slowly heading in the right direction in 2023. The question is how does hacking become a major risk in the DeFI space? And have we come to the end of it in 2023?
Hacking and DeFI Space
DeFI has shown enormous growth from its first inception in 2009 with Bitcoin where no one believed in the space to an estimated 1 Billion users by 2025, it has managed to prove almost all of its early skeptics wrong. One of the main reasons behind this is the security and transparency provided by the blockchain technology that assures its users of the bright future of the space but with every technological innovation, there will always be bad actors who will try to misuse it.
In the digital world, these bad actors come in the form of hackers or scammers who always try to disrupt the progress made in this space. For those of you who are not familiar with the term “hacking”, it refers to activities that seek to compromise digital devices and most of the time steal your personal information. This information can be in the form of your identity or bank details and is usually carried out by cybercriminals who are skilled at hijacking your devices.
The 1990s brought to us the invention of the internet and ever since then, we have lived in a digital world where most of our information is available through various platforms on the internet. This is why hacking has been so popular for a very long time as it’s much easier nowadays to gain access to somebody else’s data through hacking or scamming than before and it could also be a heavy loss for the victim if these hackers can manage to tap into their devices.
The 2022 Internet Crime Report suggests that even though the number of cybercrime complaints has managed to decrease slightly, its losses managed to increase by over 80% from its 2021 figures of $6.9 Billion to $10 Billion in 2022. These hacks comprise many types of cybercrimes but it’s a growing problem that continues to trouble the world as it is heading into a digital era and even though many attempts have been made to educate people about these crimes, it still has a pretty high success rate and a long list of victims.
This topic about the digital era brings our conversation further to the DeFI Space as the invention of Bitcoin more than 15 years ago brought a change to how we use the internet. Before the internet was a medium of exchange for information as platforms like Google and Yahoo continue to serve us with up-to-date information then it evolves its function as a medium of exchange for communication as platforms like Facebook and Twitter allow easier communication with people from all over the world. Now the internet has evolved again to a medium of exchange for transactions as with the introduction of bitcoin and the ongoing use of internet banking, it’s much easier for us to make payments.
This is why the DeFI Space continues to be a lucrative place for hackers as it presents the opportunity for these cyber criminals with not only information but also people’s funds. These Digital Currencies not only form an easier method for payments and transactions but also present easier access for these cybercrimes to tap into. This is a never-ending problem and 2022 presents its biggest year yet for hacking in the DeFI Space with a total of $3.8 Billion stolen from DeFI Institutions and protocols.
According to data from Chainalysis, the hacking activity continues to ebb and flow through the year and the biggest single month ever for DeFI Hacking came in October as $775.7 million was stolen in 32 separate attacks. These losses come from mostly two sources with DeFI Protocols making up the majority of 82.1% of total losses throughout the year and Centralized service like exchangers making up the rest.
One of the biggest hacks that occurred throughout 2022 is what happened with Nomad in August which caused nearly $200 Million in losses for its users. Nomad is a cross-chain bridge protocol of the Ethereum Network and what the protocol does is it allows transactions from the Ethereum chain to a different one. This inter-chain transaction is done using smart contracts and its particular weakness is any bug or error in the codes can be easily exploited by hackers which is exactly what happened.
With all this in mind, we are heading into a crossroads that would determine the future of the DeFI Space as a whole. It has seen massive growth throughout the year in terms of users and institutions but it also witnessed the number of hacking to skyrocket within 2021 and 2022. One of the main drivers behind this all-time high hacking activity is these cross-chain or off-chain platforms that might undermine the security of blockchain technology.
There is no doubt that blockchain technology in itself is a secure network but as long as the digital asset continues to increase in value these hacking activities will always be a lucrative option for cybercrimes. It is currently hard to see this ever ending as the internet becomes a growing part of people’s lives but we can better protect ourselves from these cybercrimes to minimize the losses.
How do we better protect ourselves from it?
When it comes to security from cyber attacks, people and institutions always look to the government for regulations to stop it from happening but obviously, there needs to be better action from the stakeholders to minimize the opportunity for these cybercrimes to occur. One of the simplest ways is to familiarize yourself with the latest innovations and information like A.I and Machine Learning to prevent cyber criminals from using it against you.
For Cross Chain protocols and institutions, the best way to operate smart contracts that sometimes involve huge user funds is to do regular audits and do a full unit of test for any vulnerabilities that might be present in the codes of your smart contract. In the constantly changing world of DeFI, yes it’s important to be the first one in the space but it is more important in the long run to be the most secure and reliable one so users can put their trust in your network.
For regular users in the DeFI Space, it is very important to not share private details and access to your cryptocurrency wallets with anyone. You can also use QT Wallets that are offered by many blockchain networks to keep your digital currencies secure and safe from any hacking activities. Another option is to use cold wallets and store access to your blockchain wallets away from the devices you frequently use to avoid cyber criminals from gaining access to your wallet details.
Last but not least Centralized Firms and Institutions to work with the Government to develop better regulations that will reduce hacking activities over the long run. As most of the activities in the Digital Space occur within Centralized Institutions such as exchangers, it is very important also to increase the security and encryption capabilities to make 2023 a better year in terms of cyber security.
All in all, we need to take the event that transpires in 2022 as a lesson moving forward to further secure the digital world for years to come. As new inventions come along with A.I and Machine Learning, we have new tools that can help the DeFI Space to protect itself from cyber crimes if utilized in the right way. The hope is as the digital asset starts to show recovery in the early parts of 2023, cyber security also will show a recovery to boost the user’s trust back into the DeFI Space. We will wait and see how this year comes along!
We in Nagaya Technologies Pte. Ltd hoped that the number of hacking activities could be greatly reduced within the years to come. This is a vital issue that needs to be resolved to steer the DeFI Space back to its path of recovery. That is also why in the creation of Nagaya, security is one of the main focuses for us to provide massive value to all of you. Interested to know more about Nagaya, you can visit our website at www.nagaya.co
Or you can talk to us at t.me/nagayaofficial
