January 2024 saw a six-fold increase in the amount of losses from web3 hackers, who continue to exploit loopholes in smart contract code used in cryptocurrency and DeFi protocols.
Hackers stole more than $126 million last month through multiple attacks on decentralized finance platforms, according to AMLBot co-founder and CEO Slava Demchuk. The incidents primarily stemmed from a small number of vulnerabilities, ranging from multi-signature wallet compromises to lending attack vectors, Demchuk added.
One of the biggest hacks in January was Orbit Bridge, a cross-chain protocol that cost malicious actors $80 million. Ozys, the South Korean company that provides the service, suspects a former employee was involved in the attack.
However, cryptocurrency fraud detection experts noted that cybersecurity within the industry is improving year-on-year, as evidenced by a decline in illicit digital asset activity.
It can be surprising and worrying that huge amounts of money are stolen every year, sometimes billions of dollars. But the main trends are clear. Less than 1% of cryptocurrency activity is related to illegal activities.
AMLBot Co-Founder and CEO, Slava Demchuk
A Chainalytic report supports this claim. The company said transactions of stolen assets via cryptocurrency and blockchain networks have decreased by 39%.
As to why these DeFi vulnerabilities persist despite growing global cryptocurrency adoption and increasing institutional demand, Demchuk told crypto.news that projects are continuing to implement security protocols to mitigate and manage risks due to the decentralized nature of blockchain. He said it adds a layer of complexity that needs to be improved.
In some cases, the projects fall short of industry-standard security measures, and in other scenarios, hackers have devised new strategies to circumvent systems aimed at protecting users, they noted.
Enhanced security measures, such as real-time transaction monitoring, and increased collaborative efforts by global law enforcement agencies are two key areas in tackling digital currency-related crimes, according to Demchuk.
AMLBot’s boss added that more communication between cryptocurrency exchanges, wallet providers and blockchain developers would help address the issue through timely sharing of threats and suspicious activity.
Ultimately, this collaboration should lead to the creation of an appropriate infrastructure that can accommodate the participation of all stakeholders. We believe that the cryptocurrency industry will gradually gain comprehensive security over time.
Slava Demchuk, co-founder and CEO of AMLBot