DeFi Projects were the target of 97 percent of crypto hacks

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Chainalysis, a blockchain analytics business, released a new study focusing on illegal activity on blockchains, finding that DeFi protocols are the most common target for hackers and that money laundering in the area has increased in the last two years.

DeFi as a Primary Target for Hackers

Illicit DeFi transactions have continuously increased since the DeFi Boom in the summer of 2020. According to Chainalysis’ study, money laundering and DeFi hacking have been the two most common illegal activities using such protocols.

In 2022, criminals stole $1.7 billion in digital assets, with DeFi protocols accounting for 97 percent of the total. The $600 million Ronin bridge breach in late March and the $320 million Wormhole assault in February were the major sources of the loot. According to the research, most stolen assets – over $840 million – have gone to hackers with links to North Korea as of 2022.

Money laundering using DeFi protocols has expanded steadily in recent years, with DeFi protocols accounting for 69 percent of crypto-based monies related to illegal activity.

The best DeFi projects of 2020- The Cryptonomist

The paper ascribed the difficulties of tracing the flow of digital assets to the design of most such protocols, which enable users to swap one token for another. In addition, the absence of KYC requirements in most DeFi schemes has also made them more appealing to criminals.

The research referenced the example of the infamous Lazarus Group, which laundered $91 million in cryptocurrency on several protocols last year. The organization allegedly converted stolen tokens to ETH and BTC, then moved them to centralized exchange accounts and cashed out the funds.

Another interesting section of the paper focused on NFT Wash Trading, a kind of market manipulation that inflates an illiquid asset artificially. NFTs may be traded between wallets owned by the same business, providing market players the false impression that demand for the asset is stronger than it is.

According to the research, one case has created over 650,000 wETH in transaction volume due to tampering. The events happened on the same platform, according to the report, since the marketplace offered incentive incentives for trading NFTs in the form of the site’s native coin.

By just trading more often between accounts, users may earn extra tokens. Meanwhile, NFT collectors may be led to assume that the marketplace is busier than it is.

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