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OCT 11, 2023
Despite rise, cryptocurrency illicit acts pale compared to legitimate ones
SOURCE: AMEINFO.COM
JAN 25, 2022
New data from blockchain analytics firm Chainalysis revealed that scammers stole $14 billion in cryptocurrency in 2021
In August, PolyNetwork, a DeFi firm, was hacked and $600 mn worth of cryptocurrencies were stolen Losses from crypto-related crime rose 79% from a year earlierIllicit addresses represented just 0.15% of the $15.8 trillion in total crypto trade volume in 2021
2021 saw many events involving cryptocurrency scams. In August, PolyNetwork, a decentralized finance (DeFi) firm working on interoperability of crypto coins, was hacked and $600 million worth of cryptocurrencies were transferred out. In November, reports surfaced of hackers forcing Instagram users to film “hostage-style videos” as part of a bitcoin scam that saw the nefarious actors gain access to their accounts.
New data from blockchain analytics firm Chainalysis revealed that scammers stole $14 billion in cryptocurrency in 2021 partially because of the growth of the decentralized finance (DeFi) platform with DeFi transactions rising by 912% in 2021, according to Chainalysis.
DeFi is a platform that effectively removes the middlemen from traditional financial transactions by replacing them with a smart contract.
But a large amount of the new protocols being launched through DeFi have code vulnerabilities that can be exploited by nefarious actors.
21% of all hacks in 2021 were a result of these codes being exploited.
Scammers getting their way
Losses from crypto-related crime rose 79% from a year earlier, driven by a spike in theft and scams.
Scamming was the greatest form of cryptocurrency-based crime in 2021, followed by theft, most of which occurred through the hacking of cryptocurrency businesses.
Bad actors often entice new investors by promising the payment of safe, lucrative, guaranteed returns over relatively short terms, sometimes measured in hours or days instead of months or years.
While there are third-party firms that perform code audits and publicly designate which protocols are secure, many users still opt to work with risky platforms that bypass this step if they think they can get a large return.
Losses from scams climbed 82% to $7.8 billion worth of cryptocurrency.
More than $2.8 billion of this total came from a relatively new but very popular type of scheme known as a “rug pull,” in which developers build what appear to be legitimate cryptocurrency projects, before ultimately taking investors’ money and disappearing.
Still, transactions involving illicit addresses represented just 0.15% of the $15.8 trillion in total crypto trade volume in 2021.
Crime is in fact becoming a smaller and smaller part of the cryptocurrency ecosystem.
One can partly credit the curbed growth of crypto-based crime to the evolving toolkit of law enforcement, as well as the inherent transparency of blockchain technologies.
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