Crypto hacking remains a serious problem

Written by Kapronasia || February 20 2024

With the crypto bear market receding and the possible return to a bull market, it is interesting to note that the amount stolen from crypto exchanges fell in 2023. However, the overall number of digital asset hacks still grew. Maybe it was the belief that the bear market would endure that partially deterred the cybercriminals? Probably not. As it turns out, the main reason that less crypto was stolen last year was that digital asset platforms are becoming more sophisticated in their security and responses to attacks, and are working more successfully with law enforcement than in the past.

Data from blockchain research firm Chainalysis show that in 2023, funds stolen fell by roughly 54.3% to $1.7 billion – though the total number of individual hacking incidents still grew from 219 in 2022 to 231 in 2023. Given that 2022 was the largest year ever for crypto theft with $3.7 billion stolen, it would appear that there are reasons for optimism about the situation.

Hacks of DeFi protocols were largely responsible for the surge in pilfered digital assets that occurred in 2021 and 2022. Cybercriminals stole more than $3.1 billion in DeFi hacks in 2022, but just $1.1 billion from DeFi protocols in 2023. Chainalysis found that the DeFi vulnerabilities hackers exploited in 2021-22 may have derived from protocol operators focusing too much on growth (can you imagine that?) and insufficiently on the implementation and maintenance of strong security systems. Specifically, there are vulnerabilities linked to insufficient auditing of smart contract design and private keys being compromised. 

Meanwhile, the world’s most notorious crypto hacking state, North Korea, committed more hacking crimes than ever in 2023 – a 20 – but stole less (US$1 billion) than its all-time high of US$1.7 billion in 2022. Chainalysis’s data show that North Korea-linked hackers stole about US$428.8 million from DeFi platforms in 2023, US$330 million from exchanges, US$150 million from targeted centralized services and US$127 million from wallet providers.

We expect that Pyongyang will redouble its efforts to pilfer crypto this year given high tensions with both South Korea and the United States. North Korea is believed to use stolen crypto to fund its secretive and illicit nuclear weapons program, as well as its conventional weapons. While some analysts have speculated that the DPRK’s unusually belligerent rhetoric of late signals its intention to spark a confrontation with the South or U.S., we reckon the regime is feeling the pinch of harsh sanctions and its own governance problems – and is keen to extract concessions from its adversaries with tough talk and posturing.