A new report from the analytics firm Chainalysis said that illicit addresses received a record $14 billion worth of crypto in 2021, which is more than 79% higher than the $7.8 billion stolen in 2020. On the other hand, the report said that crime is becoming a smaller and smaller part of the crypto ecosystem.
2021 saw many shocking cryptocurrency scams. New data from blockchain analytics firm Chainalysis is revealing that scammers stole a whopping $14 billion in cryptocurrency in 2021 partially because of the growth of the decentralized finance (DeFi) platform.
“DeFi is one of the most exciting areas of the wider cryptocurrency ecosystem, presenting huge opportunities to entrepreneurs and cryptocurrency users alike,” Chainalysis stated in its 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.”
According to Chainalysis, DeFi transactions rose by 912% in 2021.
DeFi is various platforms and protocols that effectively remove the middlemen from traditional financial transactions by replacing them with programmable smart contracts. Unfortunately, however, many new protocols being launched through DeFi have code vulnerabilities that nefarious actors can exploit.
Actually, 21% of all hacks in 2021 resulted from these vulnerabilities being exploited.
“Given the hype around DeFi, people may have been more OK with using less secure platforms due to a fear of missing out on potential gains,” Kim Grauer, Chainalysis’ head of research, told CNBC.
This resulted in a 516% rise of cryptocurrency theft from 2020, reaching $3.2 billion in 2021, with 72% of that amount taken from DeFi protocols.
On the bright side, Chainalaysis noted that the growth of legitimate cryptocurrency use was far superior to that of illegal use thanks to the evolution of law enforcement and the transparency of blockchain.
“Crime is becoming a smaller and smaller part of the cryptocurrency ecosystem,” concluded the report.
Noteworthy, PolyNetwork, a DeFi firm working on interoperability of crypto coins, was hacked in August, and about $600 million worth of cryptocurrencies were transferred out. However, a few days later, the hacker had returned all stolen funds.