Crypto crime falls during first four months of 2021, report shows
Crimes in the decentralised finance space, however, hit an all-time high during the period
Losses from cryptocurrency theft, hacks and fraud fell sharply in the first four months of the year, but crime in the booming "decentralised finance" space hit an all-time high, a report from crypto intelligence company CipherTrace showed.
DeFi applications are platforms that facilitate crypto-denominated lending outside traditional banking, using an open-source code with algorithms that set rates in real time based on supply and demand. Many DeFi applications are embedded in the Ethereum blockchain.
Globally, crypto criminals ran away with $432 million as of the end of April, according to the CipherTrace report. About 56 per cent of that, or $240m, was DeFi-related, a record peak.
For the whole of 2020, losses in the crypto sector through fraud and crime were $1.9 billion. In 2019, crypto crime losses hit a record $4.5bn.
Cryptocurrencies are once again in the spotlight with the surge in prices for the second-largest token, Ether, and social media darling Dogecoin.
The drop in crypto crime reflects some maturity in the industry, as infrastructure improved and companies and exchanges boosted security systems.
DeFi, however, is another story. The value locked – the total number of loans on DeFi platforms – was $86bn as of Wednesday, DeFi Pulse data showed, up roughly 650 per cent from $11bn in October.
The surge in the industry's growth has attracted bad actors and market participants said the rise in crime is likely to accelerate as DeFi expands further.
"As more money pours into the space from retail and institutional players, bad actors will seek to take advantage of the hype to draw people into scams and hackers will seek out projects that have launched without performing adequate security audits, exploiting loopholes encoded in the smart contracts," Dave Jevans, CipherTrace's chief executive, said in an emailed response to Reuters.
Losses from DeFi-related hacks already exceeded the $129m stolen during the whole of 2020. In 2019, there were no DeFi losses reported.
One of the major losses in the DeFi space was the $80m worth of funds stolen on April 19 from EasyFi Network, a DeFi project on the Polygon Network, the CipherTrace report said. EasyFi reported that a hacker stole roughly $80m worth of funds from its wallet.
Published: May 14, 2021 08:30 AM