Next Gen Investing

Crypto hackers have stolen nearly $2 billion this year—Here's why it's a growing problem

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Hackers have already stolen nearly $2 billion worth of cryptocurrency in 2022 — and the year is only half over.

As of July, $1.9 billion in crypto has been stolen by cybercriminal hacks, according to Chainalysis' "Mid-year Crypto Crime Update."

At this point last year, hackers had stolen $1.2 billion, according to the report. That's a spike of nearly 60% compared to a year ago.

"Despite the misconception that cryptocurrency is anonymous, it remains easier to run away with coins or tokens," says Max Krupyshev, co-founder and leader of crypto payment ecosystem CoinsPaid. "I don't think that crypto hackers are stronger than the 'usual' kinds, it's just that crypto platforms are new and hold valuable assets."

Bad actors are increasingly targeting decentralized finance (DeFi) protocols, which are uniquely vulnerable to hacking, according to the report. DeFi programs are the underlying blockchain technology that enable financial transactions to occur outside of traditional banks. These programs primarily utilize the Ethereum blockchain.

DeFi programs are public and use open-source code, which can be helpful because it typically allows for security issues to be discovered and fixed quickly.

However, since open-source code is available for anyone to review, cybercriminals are able to extensively study the code and find vulnerabilities that can be exploited and used to steal crypto funds, according to the report.

And hackers aren't likely to stop any time soon. They have already stolen $190 million from crypto startup Nomad and $5 million from several Solana digital wallets during the first week of August, Chainalysis reports.

"The only way to stop them is for the industry to shore up security and educate consumers on how to find safe projects to invest in," the report advises.

There are plenty of virtual wallets that can safely store your crypto and secure it against online attacks, too, says Krupyshev. However, it's important to do thorough research first to determine which type of wallet makes sense for you.

It's also crucial to do your own research before investing in anything in order to avoid potential scams.

There are "fake opportunities and Ponzi [schemes] shining with their neon lights all over the place," Krupyshev warns. "No secure wallet can save a young investor from them."

Additionally, law enforcement must continue to develop its ability to seize stolen cryptocurrency so that hacks are no longer attractive to cybercriminals, Chainalysis reports.

Although many investors are drawn to the unregulated nature of cryptocurrency, the lack of a central regulating authority means investors typically don't have the same protections offered by traditional financial institutions like banks.

And remember, crypto assets can be highly volatile and subject to wild price valuations. There's no guarantee of making a return on your investment, which is why experts recommend only investing as much as you're prepared to potentially lose.

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