In the year 2023, there has been a significant decline of 51% in the digital assets lost to hacks, scams, and exploits compared to the previous year. However, according to a report by blockchain security firm CertiK, a staggering $1.84 billion in cryptocurrencies was lost across 751 security breaches. The report titled “Hack3d” highlights major exploits and incidents that led to this substantial loss.
Decrease in Losses
The data shows that the total losses in 2023 were down 51% from the previous year’s total of $3.7 billion. While this is a significant decline, CertiK analysts note that $1.8 billion is still an alarming amount.
Causes of Breaches
According to the study, private key compromises were responsible for several digital asset breaches, resulting in the highest financial losses. In just 47 incidents, $880,892,924 worth of crypto assets were lost due to private key compromises. These compromises represented nearly half of all financial losses, although they accounted for only 6.3% of all security breaches.
CertiK suggests best practices for private key management to mitigate future breaches. These include using multi-signature wallets, hardware wallets, implementing access control policies, employing encrypted storage, and regularly monitoring the use of private keys.
Emerging Trend of “Retroactive Bug Bounties”
The report also highlights the emerging trend of “retroactive bug bounties” in 2023, where hackers return a portion of the stolen funds. Across 36 events, $219 million was returned, representing 12% of the total $1.84 billion lost. Several protocols have successfully negotiated “grey hat” bounties, leading to the return of significant portions of stolen funds.
For instance, Euler Finance experienced a flash loan attack in March, resulting in over $197 million in losses. The DeFi protocol later offered a $1 million bounty for information leading to the arrest of the attackers and demanded the return of the stolen funds. Ultimately, the Euler exploiter returned a total of 84,951 Ether (worth approximately $147.8 million) and $29.9 million in the DAI stablecoin.
Ronghui Gu, co-founder of CertiK, sees positive growth in blockchain security for 2024. “The growth of bug bounty platforms and other proactive security measures is a good sign,” Gu said. “Hopefully, we will see a continued decline in losses throughout 2024.”
The report also predicts that the security of the crypto industry will face a test during the crypto bull market. “Looking ahead, the real test of DeFi’s improved security protocols awaits in the resurgence of a bull market,” the report added.
