Scammers were able to amass an astonishing $14 billion in cryptocurrencies in 2021 alone. The Decentralized Finance (DeFi) platforms were the hackers’ favorite exploitation spots, according to data from blockchain analytics firm Chainalysis. Crypto-related crime losses rose 79% higher compared to 2020, driven mainly by a surge in scams.
Scamming was one of the hottest trends in cryptocurrency-based crime in 2021. Theft came in second place — most of these were coming from hacking crypto businesses. According to the analysis firm, DeFi is taking a large space when it comes to theft and crypto scams.
“DeFi is one of the most exciting areas of the wider cryptocurrency ecosystem, presenting huge opportunities to entrepreneurs and cryptocurrency users alike,” Chainalysis wrote in its annual Crypto Crime report.
“But DeFi is unlikely to realize its full potential if the same decentralization that makes it so dynamic also allows for widespread scamming and theft.”
DeFi is the new buzzword of 2021. However, the rapidly growing sector of blockchain technology has resulted in major losses to crypto traders, investors, and businesses. The project revolves around cutting out middlemen in transactions — such as banks for example.
Instead of banks and lawyers, people rely in decentralized finance on a programmable piece of code called a smart contract. Smart contracts are written and recorded on the blockchain whenever a transaction happens, and users could trace transactions and approve the ownership of an item by verifying the smart contracts’ history. The contract executes on certain conditions, making it a secure medium for transactions that make them private.
“The financial system is basically sending money around with various terms and conditions attached to it,” said Joey Krug, Chief Investment Officer at Pantera Capital, a cryptocurrency and blockchain-focused asset manager.
Nonetheless, with the increase of DeFi-related cyber-crimes, developers and crypto businesses should reinforce their systems to keep their users secure, especially that DeFi is still in its infancy, and with the rising scams and thefts, the cryptocurrency might lose its charm.