Crypto Security: Unmasking the Top Hacks and Trends in Digital Asset Security 2023

Security remains one of the biggest challenges in the digital asset industry. In 2022 alone, the total value of crypto stolen through hacks amounted to $3.8 billion. While this figure is down 77% as of June 2023 compared to the same period last year, it is hard to ignore the imminent threats that hacks and scams pose to the larger digital asset ecosystem.

Notably, Decentralized Finance (DeFi) protocols account for the majority of the hacks, with 82.1% of the funds compromised last year originating from this niche. Over 50% of the hacks in DeFi can be attributed to smart contract vulnerabilities, which, although they are a fundamental part of the DeFi ecosystem, also present huge security risks.

In the next sections of this article, we will delve into the state of security in the digital asset market, highlighting the top 10 hacks in crypto in 2023, along with key trends shaping the security landscape of this industry.

Major Trends in Crypto Security Landscape 2023

In addition to the top crypto hacks of 2023, several significant trends have emerged this year in the crypto security landscape.

1 DeFi accounted for 62% of the Losses in H1 2023

As anticipated, DeFi remains the most targeted niche for crypto hackers. A report by Footprint Analytics revealed that out of the total $471.4 million lost in H1 2023, DeFi accounted for $292.6 million, which is approximately 62%.

2 Ethereum is the Most Targeted Chain by Hackers

According to DeFi Llama metrics, Ethereum currently leads the pack in terms of locked value, boasting a TVL of $19 billion, while the overall DeFi TVL stands slightly above $36 billion. Unsurprisingly, this leading DeFi chain is also a hotbed for hackers, given the substantial funds in circulation within the Ethereum ecosystem.

On-chain metrics reveal that over $356 million was lost on the Ethereum blockchain in H1 2023, with the BNB chain following at a distant second with $29 million.

However, at the same time, it is worth noting that the number of Ethereum builders complying with the United States Office of Foreign Assets Control (OFAC) sanctions has increased to 5 out of the top 6 Ethereum block builders, following the Tornado Cash sanctions last year.

3 Tornado Cash Volume Dramatically Reduced

Still on the Tornado Cash sanction, which came into effect on August 8, 2022, volumes transacted through this tumbler have significantly decreased this year. For context, the U.S. Government sanctioned Tornado Cash, an Ethereum-built protocol, last year to prevent North Korean hackers from further exploiting the crypto ecosystem by stealing funds, laundering, and evading international sanctions.

4 North Korea Hackers Are Still Very Active

Despite the hurdles placed by the U.S. government and other authorities across the globe, North Korean hackers, particularly the Lazarus Group, have remained active throughout 2023. Out of the top 10 hacks this year, the Lazarus Group allegedly masterminded at least four, including Atomic Wallet ($100 million), Alphapo ($41.3 million), Stake.com ($41 million), and CoinsPaid ($37.3 million).

Conclusion

The digital asset industry is still in its early stages of development, particularly concerning newer innovations in the DeFi, NFT, and Metaverse ecosystems. Like any nascent technology, security incidents are bound to occur, but this does not imply that they cannot be prevented. Most of the hacks in the crypto space can be mitigated through comprehensive security audits, transparent infrastructures, and accountability frameworks to prevent stakeholders from misusing investors' funds.

Also published here.