Blockchain analytics firm, Chalysis, released a new report for the year 2021, which showed that cybercriminals stole $4billion worth of crypto. According to the report, over half of the stolen crypto, accounting for $7.8 billion, went to scammers.
Details of the Report
The report showed that most crime involving crypto was in the form of scams. Many scammers are taking advantage of the hype around Bitcoin and other coins to steal from people. However, as a percentage of total transactions, crypto crime appears to have fallen. The report found that illicit addresses accounted for 0.15% of all crypto transactions in 2021, which is a huge drop from the 0.62 percent recorded in 2020. In terms of the total number, however, crypto crime was up by a massive 79 percent from the previous year.
The Rise of DeFi and Associated Security Challenge
The report showed that illicit crypto addresses held around $10 billion in crypto, with most of this coming from crypto thefts. Chainalysis stated that the rise of crypto crime had been propelled by the rise of DeFi, which lets people access banking services within the blockchain. The study found that most scams and thefts of crypto involved the DeFi industry in 2021. Hackers have been targeting DeFi projects with great success since most of them usually have a small maintenance team, which leaves them vulnerable to security issues.
In 2021, DeFi transaction volumes rose by 912 percent. The report states that DeFi remains one of the most exciting areas within the crypt sector. It notes that this field presents huge opportunities for entrepreneurs and crypto users. However, the report cautions that DeFi will not realize its full potential unless the issue of widespread theft and scams is resolved.
In December 2021, Chainalysis had released another report that shows 36 percent of crypto scam victims lost $2.8 billion worth of funds to rug pulls. A rug pull is a scam where developers abandon a project and run off with investor funds. In total, crypto scams rose by 81 percent in 2021, compared to 2020.
One of the best examples of a rug pull was the “Squid Game” pump and dump scam. Developers created a crypto coin dubbed Squid Game, to ride on the hype of a popular Netflix show, and the coin’s value grew to millions in just a few hours. Later, they abandoned the project and walked away with millions, leaving the Squid Game coin’s value at zero.
Crypto Crime is Falling
While total volumes may be rising, crypto crimes account for a smaller and smaller section of the crypto ecosystem, according to the report. One reason for this is that authorities globally are developing better tools to counter crypto crime. Besides that, organizations are getting better at handling ransomware attacks, where payment is demanded in crypto.
Since all crypto transactions are recorded on the blockchain, authorities only need to develop the right tools. With these tools, they can peer as far back as the first BTC transaction and trace every transaction using bread crumbs left by the scammers. As scammers realize this, they will find it less appealing to indulge in crypto-related crime.