Blockchain sleuths Chainalysis estimates that more than two-thirds of all stolen funds across the crypto space have come from cross-chain bridge hacks this year.
These sorts of attacks refer to exploits or hacks that occur on so-called bridging protocols connecting different blockchains.
In a recent report, the firm said that theft on bridges has amounted to $2 billion worth of stolen funds, posing a “significant threat” to the credibility of blockchain technology.
This analysis comes in the wake of Monday’s Nomad hack, which saw $200 million wiped from the bridge platform. Nomad functions as a pathway between different blockchains, allowing investors to move their funds between blockchains such as Ethereum, Avalanche, and Moonbeam (GLMR) platforms.
Quarterly value stolen. Source: Chainalysis.
The Nomad heist also represents the seventh major hack for crypto bridges this year, begging the question: What makes them such a glaring target?
Crypto bridges and liquidity
According to Arda Arkantura, a threat analyst at crypto data and compliance firm Elliptic, the issue with cross-chain bridges is their liquidity.
“You freeze up a token on one side of the blockchain and then unfreeze it from the other side. This means you have a lot of liquidity and smart contracts with funds stored on them,” says Arkantura. “In crypto, when something is liquid, it is lucrative.”
These cross-chain bridges have been so lucrative that cross-chain hacks have accounted for 13.5% of all theft within decentralized applications (dApps), according to Elliptic.
In March, blockchain gaming company Axie Infinity also experienced a $622 million hack as its Ronin side-chain, which connects it to the Ethereum network, succumbed to theft. A month prior to the Ronin heist, Wormhole, a bridge that connects Ethereum and Solana, was bereft of $320 million dollars.
Chainalysis also suggests that cross-chain bridges have become the prime target for activist or terrorist hacks, with criminals from North Korea having reportedly stolen roughly $1 billion worth of crypto this year.
The irony with cross-chain bridges is their prevalence within the DeFi ecosystem. By centralizing smart contracts with funds and transactions written on them, they provide a focal point for criminals to exploit.
“It’s an interesting paradox,” says Arkuntura.
“There are some individuals who will say that centralization for smart contracts allows them to immediately fix issues [on the bridge]. On the other side, centralization makes it a lot easier for illicit actors,” he added.
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Source: https://decrypt.co/106718/cross-chain-crypto-bridge-hacks-hit-2-billion-2022-chainalysis
