Crypto Crime Hit Record $14 Billion in 2021, Research Shows
Over the course of last year, Cryptocurrency theft increased by 516%. On top of that, according to the new data from Chainalysis, in 2021, the losses from crypto-related crime increased by 76%. Scamming was the most popular form of cryptocurrency-based crime last year, and one of the main culprits is DeFi - decentralized finance and platforms that offer these services. Cryptocurrency theft amounted to $32 billion in 2021, and from this staggering number, 72% was taken from DeFi protocols.
DeFi holds a huge potential for cryptocurrency, but its most valuable quality, decentralization, is also its biggest weakness. Precisely because of its decentralized nature, DeFi is vulnerable to scams, theft and all crypto enthusiasts should approach the platforms offering DeFi services with caution.
What is DeFi ?
The primary objective of all DeFi is to cut out the middlemen from the traditional financial transactions and deliver finances to people directly. DeFi operates through smart contracts, a contract is written on the blockchain. These smart contracts come attached to the money sent around through this financial system. Smart contracts dictate the terms and conditions of financial transactions and ensure that they are met.
Compared to 2020, we saw 912% growth in DeFi transactions in 2021, but this does not mean that the system doesn’t have its set of flaws. One of the major risks of using DeFi for financial transactions is that many of its protocols have code vulnerabilities. Of course, this does not characterize the entire industry, as many firms conduct routine audits and put real effort into their security, but this practice is not universal. And there are many firms with less than perfect protocols that hackers can easily exploit.
The new popular scheme making rounds around the crypto ecosystem is called a “rug pull”. Rug pull entails creating a cryptocurrency project that appears legitimate to outsiders but is actually a scam. Developers lure investors in with huge promises and fake data and then ultimately disappear, together with investors’ finances.
People don’t practice more caution when choosing the platforms for DeFi because many are afraid of missing out on big gains. Some cryptocurrency users deliberately choose to work with firms known to be risky in hopes that they’ll be able to get large returns.
But the legitimate cryptocurrency usage has grown much more substantially over the last year than crypto-related crime. Crypto crime is taking up less and less space in the overall crypto transactions, meaning that it is generally safer to use cryptocurrencies now than it was a year ago. The crypto crime-related statistics should not discourage users from getting more involved with the crypto ecosystem. However, it should encourage us to use more caution when dealing with cryptocurrency and DeFi in general. Here are some steps you can take to ensure that you don’t become a victim of crypto-related crime.
Use a VPN When Working with DeFi Platforms
As mentioned above, vulnerabilities in DeFi protocols are quite common. Apart from the financial risks that come from these vulnerabilities, hackers also get access to your personal information. This could include your IP address, passwords, and even your location. That is not the sort of information you want out there for strangers to see. The most effective way to negate that risk is to use a VPN when browsing online and specifically when dealing with DeFi platforms and cryptocurrency. A VPN keeps your connection private and protects your personal details even from the most persistent attackers.
Only Use Secure DeFi Platforms
It might be tempting to use platforms that could bring back bigger returns, but that always comes with a price. You should not take the astounding number of “rug pull” schemes and the exploitation of different weaknesses in protocol code lightly. Multiple platforms provide secure services and care about safety and privacy.
According to the Chainalysis report, crime is becoming a smaller and smaller part of the crypto world, but the risks and attack techniques are becoming more sophisticated. This is why staying safe should be your priority when dealing with cryptocurrencies.
***
DISCLAIMER
The views, opinions and positions expressed in this article are those of the author alone and do not necessarily represent those of https://www.cryptowisser.com/ or any company or individual affiliated with https://www.cryptowisser.com/. We do not guarantee the accuracy, completeness or validity of any statements made within this article. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author. Any liability with regards to infringement of intellectual property rights also remains with them.