Global crypto hacking falls by 70% in the first quarter of 2023

Global crypto hacking fell by 70% worldwide, according to a recent report from TRM Labs. The report states that $400 million was lost across nearly 40 cryptocurrency attacks in the first three months of 2023, but that figure is still down 70% from the same period in 2022.

The value of cryptocurrency assets stolen due to hacks witnessed a huge rise last year as the industry lost $3.7 billion to thefts. This represents a 58 per cent increase over the $2.3 billion that cybercriminals stole from investors and exchanges in 2021, according to a report released by Immunefi, a web3 security testing platform.

Thus, it is good to see the numbers declining in 2023.

For all of the drama surrounding crypto and the price vulnerability, one major clampdown on its acceptability by many is the recurrent cyber attacks it has endured in the last couple of years. Last year, a series of crypto hacks rocked the crypto ecosystem. One of the notable crypto hacks of 2022 is the Solana-based DeFi trading platform Mango Market, which lost $117 million to an unidentified crypto hacker.

In 2022, North Korea-linked hackers shattered their record for theft after stealing an estimated $1.7 billion worth of cryptocurrency across several hacks. Per the Chainanalysis report, 2022 was the biggest year ever for crypto hacking, with $3.8 billion stolen, mostly from DeFi protocols and by North Korea-linked attackers.

The volume of stolen funds is 70% lower in Q1 2023, with the average hack size dropping from $30 million to $10.5 million yearly.

The average hack size also took a hit in Q1 2023—to $10.5 million from nearly $30 million in the same quarter of 2022—even as the number of incidents was similar (around 40), TRM Labs said in its report.

“To date, hacking victims have recovered over half of all stolen funds in Q1 2023,” the firm added. “For example, in March 2023, a hacker exploited a bug in Tender.fi’s code that allowed the attacker to steal over USD 1.5 million. The hacker later contacted Tender.fi and agreed to return the funds in exchange for a bug bounty of 62.15 ether, worth $850,000.”

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What has led to the drop in crypto hacks in Q1 2023?

TRM Labs attributes this year’s decrease in crypto attacks to various reasons, including enhanced cybersecurity processes, tougher regulatory frameworks, and increased coordination among industry participants.

Nonetheless, there are still reasons to stay vigilant and not subconsciously think the fight is over or has been won.

“Unfortunately, this slowdown is most likely a temporary reprieve rather than a long-term trend,” TRM Labs said, adding that a few large-scale attacks account for most of the amount stolen from crypto platforms and users, which can cause the total amount stolen to fluctuate dramatically month-to-month.

“The ten largest hacks in 2022 accounted for approximately 75% of the total amount stolen in 2022,” it concluded.

Recovery of stolen funds

TRM Labs said that victims of cryptocurrency breaches regained more than half of the monies taken in Q1. In other cases, the hacker stole funds and bargained with the hacked company for a “white hat bounty” and the promise that they would not be prosecuted for their crime. Horizon, Poly Network, Euler Finance, Sentiment, Allbridge, and Fei Protocol were among the companies that paid the bounty.

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According to Ari Redbord, head of legal and government affairs at TRM Labs, there could be a variety of variables driving this tendency. Wider adoption of AML standards makes it more difficult for bad hackers to off-ramp stolen assets, and widespread tracing and monitoring of stolen funds by law enforcement and Twitter sleuths using open-source tools is one of the main reasons.

“After a hack, the world is literally watching, which makes it harder to move and off-ramp funds,” Redbord said.

He said the growth of “white hat” hackers could play a critical role in the ecosystem as it grows. “Right now, many DeFi services lack hardened cyber controls, and white-hat hackers could help build that. The bounties being offered are essentially their compensation,” he said.