[TL; DR]
During Q3, 2024 bad actors store around $412 million worth of cryptocurrencies from exchanges.
In July WazirX lost $235 worth of cryptocurrencies to hackers while digital currencies valued at around $52 million were drained from BingX.
Self-custody of digital assets may help to prevent crypto losses.
Introduction
Crypto crimes remain one of the greatest challenges to the adoption of digital currencies. This is because risk-averse investors are afraid to put their money in digital assets. Instead, they opt to focus on traditional investment assets such as foreign currencies and commodities like gold. However, the launch of several spot crypto ETFs may lure such investors to the sector. This analysis looks at crypto losses that occurred in quarter three (Q3), 2024 due to malicious actions such as hacking.
Q3 2024 Sees $412 Million in Crypto Losses
A report by Immunefi, a blockchain security firm, shows that during quarter three the crypto sector lost around $412,994,499 through malicious actions such as hacking and crypto frauds. According to the report, hacking accounted for about 99.25% of the total crypto losses. In other words, about $409,906,947 was lost through hacking. On the contrary, only 0.75% of the crypto losses occurred as a result of frauds.
Read also: Why Many Crypto Assets Are Falling
Crypto Security Report: Losses Drop by 40% Year-Over-Year
Whereas the Q3 crypto losses seem very high there has been a 40% decrease in the amount of stolen digital assets from Q3, 2023. According to the Immunefi report the crypto security has improved remarkably during Q3, 2024. This is because there has been a fall in the amount of stolen digital currencies. As an example, during Q3 2023 the total crypto losses amounted to $685 million. On the other hand, during Q2, this year there was a total loss of $572 million. Therefore, in general terms, incidences of crypto frauds have decreased by 86%.
The good news is that there has been a significant drop in crypto fraud cases. The decrease in crypto losses indicates that many cryptocurrency projects have been improving their blockchain security measures. It is important to note, though, that Ethereum hacks and BNB chain losses have remained relatively high. In specific terms, more than half of the crypto hacks occurred on Ethereum and BNB chains. Ethereum suffered 15 successful attacks and the BNB chain had 8 incidents. The other blockchains that were also breached include Base, Blast, Solana, and Arbitrum. The fact that most previously highly affected blockchains are no longer on the list shows that they might have improved their crypto asset protection measures.
Decentralized vs. Centralized Finance: Where the Risks Lie
The current crypto theft trends show that centralized exchanges lost more digital assets than decentralized exchanges. For example, about 74.8% of the crypto losses that occurred during Q3 took place on Centralized Finance (CeFi) platforms. This means that DeFi attacks accounted for only 25.20% of the total losses for Q3. It also indicates that there has been an improvement in decentralized finance security.
Generally, though, the greater proportion of CeFi losses emanated from the crypto hacks of WazirX, an Indian crypto exchange - that lost $235 million in July - and BingX, a Singapore-based exchange - that lost $52 million in early September. These two crypto theft incidents account for about 69.5% of all Q3 losses. This shows the crypto investment risks that arise from centralized finance vulnerabilities. It also shows the need for improving crypto safety of the sector.
Regarding the latest report, Mitchell Amador, Immunefi’s CEO said, “We’re seeing a higher number of incidents targeting DeFi, while CeFi experiences fewer incidents but often with more severe consequences, with hundreds of millions in stolen funds in a single exploit. In CeFi, the biggest infrastructural issue is private key management, which is essential to maintaining the self-custody of crypto assets but is not typically subject to security audits.”
Overview of the Q3's BingX Largest Security Hack
As said, the greatest CeFi losses were a result of crypto hacks of BingX and WazirX. Basically, WazirX was hacked on 18 July and lost about $235 million. The notorious North Korea backed hacking group, Lazarus Group, is blamed for that attack. On the other hand, on 20 September BingX was breached and lost $52 million worth of digital assets. During the attack the exchange lost $13.25 million worth of Ether (ETH), $4.4 million in Tether (USDT) and $2.3 million in Binance Coin (BNB), among other digital currencies. These breaches were part of a series of attacks targeted at centralized exchanges in Asia. During September Indodax, an Indonesian exchange, also lost $20.58 million to hackers while in May the attack on Japan’s DMM Bitcoin resulted in a loss of digital assets valued at around $305 million. All these incidents show the need for crypto exchanges, whether centralized or decentralized, to improve their web3 ecosystem safety.
The Role of Self-Custody in Preventing Crypto Losses
In the wake of large crypto losses from decentralized and centralized exchanges self-custody in crypto may help in crypto fraud reduction and in securing crypto assets. Self-custody of digital assets is important as holding one’s digital assets increases their security. Based on current crypto security trends keeping digital assets in hardware wallets reduces the chance of losing them through hacking. Generally, hackers and fraudsters target large crypto projects that hold huge amounts of digital assets. They spend less time targeting individual wallets, especially hard wallets and other personal cold storage facilities.
With self-custody, you keep your private keys and seed phrases which leaves very little room for unauthorized individuals to access them. Finally, self-custody enhances your personal privacy as no one can easily detect your digital asset balances and transactions. With self-custody you can adopt different crypto security improvement measures such as the use of biometric and two-factor authentications which are key attributes for securing crypto assets.
Conclusion
During the third quarter of the year the crypto sector lost crypto assets worth $412 million to hackers and fraudsters. Although the bad actors mostly targeted decentralized exchanges, centralized exchanges incurred more crypto losses. The blockchains that were breached include Ethereum, BNB chain, Base, Blast, Solana and Arbitrum. It is highly advisable for crypto users to manage their digital assets using self-custody.