Significant Decline in Digital Asset Losses
In 2023, there was a significant decline of 51% in the amount of digital assets lost to hacks, scams, and exploits compared to the previous year. However, blockchain security firm CertiK reveals that a staggering $1.84 billion in cryptocurrencies were still lost across 751 security breaches.
The “Hack3d” Report
The recently published “Hack3d” report by CertiK highlights major exploits and incidents that contributed to this large number. The data shows that the losses in 2023 were down by 51% compared to 2022’s total of $3.7 billion.
Despite the decline, CertiK analysts note that $1.8 billion is still a significant amount of losses.
Quarterly Losses and Costly Months
The data further reveals that the third quarter of 2023 saw the highest losses, totaling $686,558,472 from 183 hacks and scams. Additionally, November was identified as the most costly month of the year.
Private Key Compromises
According to the study, several digital asset breaches were caused by private key compromises. In fact, six out of the ten most costly security incidents in 2023 were due to these compromises. Private key compromises resulted in the loss of $880,892,924 worth of crypto assets across 47 incidents. While they represented just 6.3% of all security breaches, these compromises accounted for nearly half of all financial losses.
CertiK recommends implementing various private key management best practices to prevent future breaches, including multi-signature wallets, hardware wallets, access control policies, encrypted storage, and regular monitoring.
The Trend of Bug Bounties
The report also highlights the emerging trend of “retroactive bug bounties” in 2023. A total of $219 million was returned across 36 events, which represents 12% of the total amount lost. Many protocols successfully negotiated “grey hat” bounties, leading to hackers returning significant portions of stolen funds.
For example, Euler Finance offered a $1 million bounty for information leading to the arrest of attackers and the return of stolen funds after falling victim to a flash loan attack. The exploiters eventually returned approximately $147.8 million worth of Ether and $29.9 million in the DAI stablecoin.
Positive Outlook for Blockchain Security
Ronghui Gu, co-founder of CertiK, predicts positive growth in blockchain security in 2024. The increased adoption of bug bounty platforms and other proactive security measures is seen as a good sign. CertiK analysts hope to see a continued decline in losses throughout the year.
However, the report also emphasizes that the crypto bull market will put the industry’s security to the test. The expectation is not to eliminate losses entirely, but rather to reduce the correlation between total value locked (TVL) and losses from hacks and scams.
Hot Take: $1.8 Billion Cryptos Lost Across 751 Security Breaches in 2023
In 2023, there was a significant decline in digital asset losses compared to the previous year. However, a staggering $1.84 billion in cryptocurrencies were still lost across 751 security breaches. Private key compromises were identified as a major cause of these breaches, resulting in nearly half of all financial losses. The report also highlighted the emerging trend of bug bounties, where hackers returned a portion of stolen funds. Despite the decline in losses, CertiK analysts stress that $1.8 billion is still a significant amount. Looking ahead, blockchain security will face challenges in the crypto bull market, but proactive measures and improved security protocols offer hope for continued decline in losses.
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