By Michael B. Cohen
Vice President of Global Operations
MyChargeBack
Cryptocurrency users had a slightly better year in 2023, as they suffered losses of nearly $2 billion due to various malicious activities such as scams, rug pulls, and hacks. Though it may be no consolation for the victims, it does represent a notable improvement from the previous year, when losses amounted to a staggering $4.2 billion.
What factors contributed to this reduction in losses? Here are some possible explanations:
- Improved Security Protocols: Many cryptocurrency platforms and projects implemented more robust security measures to prevent breaches and exploits. For example, some platforms adopted multi-signature wallets, biometric authentication, and decentralized governance models to enhance their security.
- Increased Awareness: Cryptocurrency users became more aware of the common risks and pitfalls in the industry, and learned how to avoid them. For example, some users adopted best practices such as using hardware wallets, verifying smart contracts, and researching projects before investing.
- Overall Decreased Market Activity: The cryptocurrency market experienced a prolonged bear market in 2023, which reduced the incentives and opportunities for malicious actors to target the industry. Some major alternative tokens, such as Ethereum, Cardano, and Polkadot, saw significant drops in their prices before recovering towards the end of the year.
However, despite the reduction in losses, the cryptocurrency industry is still plagued by security challenges and vulnerabilities. The $2 billion losses in 2023 do not include the massive losses incurred by the collapses of three major players in the industry: Terraform Labs, Celsius, and FTX. These three entities collectively lost over $40 billion in 2023 due to various reasons, such as regulatory crackdowns, technical failures, and internal fraud.
Moreover, the reduction in losses coincides with a period of low market activity and sentiment. It remains to be seen whether the industry can maintain its security standards when the market conditions become more bullish and attractive for investors and hackers alike.
On a positive note, the recovery rate of funds lost to hacks, scams, and exploits improved significantly in 2023, reaching around 10%, up from just 2% in 2022, according to De.Fi, which provides unified data for the most popular DeFi protocols. This indicates that some platforms and projects have been able to retrieve or reimburse some of the stolen or lost funds, either through legal actions, negotiations, or community efforts.
The losses in 2023 were distributed across different blockchains and platforms. Here are some of the most notable ones:
- Ethereum: The most popular blockchain for decentralized applications (dApps) and smart contracts also suffered the most losses in 2023. According to De.Fi, Ethereum users lost $1.35 billion in approximately 170 incidents. Some of the major incidents include the $200 million hack of SushiSwap, the $150 million exploit of Yearn Finance, and the $100 million rug pull of Squid Game Token.
- BNB Chain: The native blockchain of Binance, the largest cryptocurrency exchange by volume, also faced significant security issues in 2023. BNB Chain users lost $110.12 million across 213 incidents. Some of the major incidents include the $50 million hack of PancakeSwap, the $25 million exploit of Venus Protocol, and the $10 million rug pull of SafeMoon.
- zkSync Era: One of the emerging blockchains that aims to provide scalability and privacy for Ethereum dApps also encountered some security problems in 2023. zkSync Era users lost $5.2 million in two incidents. The most notable one was the $5 million hack of zkTube Protocol, which exploited a vulnerability in its zero-knowledge proof system.
- Solana: Another rising blockchain that boasts high speed and low fees also experienced a security breach in 2023. Solana users lost $1 million in a single attack that targeted its bridge contract with Ethereum.
In addition to these blockchain-specific losses, there were also some losses on centralized platforms that provide cryptocurrency services. According to De.Fi, centralized platforms users lost approximately $256 million across seven cases. The largest incident was the November attack on Poloniex, which netted $122 million from its hot wallets.
The methods used by hackers and scammers to exploit the cryptocurrency industry varied widely in 2023. Here are some of the most popular ones:
- Access Control Exploits: This method involves gaining unauthorized access to wallets or contracts by exploiting weak passwords, phishing attacks, or social engineering. This was the most damaging method in 2023, with 29 cases resulting in over $852 million in losses.
- Flash-Loan Attacks: This method involves borrowing large amounts of funds from decentralized lending platforms and using them to manipulate prices or liquidity on decentralized exchanges or automated market makers. This was the second-most cash-generative method in 2023, with 26 cases leading to $275 million in losses.
- Exit Scams: This method involves launching a new project or platform with a lot of hype and promises and then disappearing with the funds raised from investors or users. This generated 262 cases accounting for $136 million.
As we can see, the cryptocurrency industry is still a risky and volatile space, despite the improvements in security and awareness in 2023. Users should always exercise caution and due diligence when engaging with the industry, and be prepared for the worst-case scenarios. The industry still has a long way to go before it can achieve its full potential and promise of a decentralized and secure financial system.
Don’t give up on your crypto losses! MyChargeBack has the tools and expertise to help you recover your funds from scammers. Here’s how we do it:
- We listen to your story and understand your situation.
- We collect all the evidence and documents related to your case.
- We use cutting-edge technology, such as law enforcement software, bitcoin forensics and a scam detection database, to track down the scammers and their wallets.
- We prepare a detailed report that you can use to file a complaint with the authorities.
- We guide you through the best strategy to reclaim your money and avoid future scams.
Don’t let the scammers get away with your hard-earned money. Contact us today and let us help you with your crypto recovery!
