DeFi is the new stronghold of crypto financial crime

by Margharet Tess

May 18, 2022

Reading Time: 2 mins read

The decentralized finance industry (DeFi for short) is becoming a honey pot for cybercriminals of all kinds. This is confirmed by the current one “Web3 Safety & Compliance Report” of the largest crypto data service provider worldwide, Chainalysis. Whether hacks, money laundering or scams: DeFi is ahead almost everywhere. The biggest beneficiaries: North Korean hacker groups like Lazarus.

DeFi emerged in 2017 and has been booming for two years. It is a decentralized financial system, open to anyone with internet access, and bundles a dense network with hundreds of platforms that work with blockchains. They currently manage over 100 billion US dollars in assets (Total Value Locked, TVL for short).

With the help of so-called smart contracts, money in the form of cryptocurrencies is programmed in such a way that it automatically carries out functions such as lending and borrowing. That takes middlemen (like traditional banks) out of the equation. And unfortunately also opens the floodgates for money launderers and hackers.

Hacks at record high and DeFi leads by a wide margin

Illegal DeFi transactions have skyrocketed since 2021, driven primarily by theft of funds through hacking and abuse of DeFi protocols for money laundering, Chainalysis reports in its report. Almost 70 percent of stolen funds are sent here.

The second quarter of 2022 was also the quarter with the most hacker attacks so far. And almost 97 percent of all stolen cryptocurrencies in 2022 will be in the DeFi sector, according to Chainalysis. So far, the total has been almost 1.7 billion US dollars. If you want to know how to protect yourself, these steps are recommended by security experts.

For North Korean hackers, 2022 was their most successful year yet. In total, they stole almost half of all funds by May 2022, over $800 million – $635 million alone in the worst DeFi heist of all time, the hack of Axe Infinity. You can find out all the background to the case in the current issue.

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Author
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Margharet Tess

Editor, Developer at Cryptheory Labs

I have been active in the cryptocurrency world for over 6 years, during which I have written countless articles about this sector. What fascinates me most about cryptocurrencies is their technological aspect and the problems they aim to solve. In the past three years, I have ventured into app development and am currently working on a larger project called P2E Buzzer. Stay tuned for the surprise. 🙂 My previous experiences: Business2Community.com, TradingPlatforms.com

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