The crypto world, already rattled by a spate of attacks on prominent exchanges in 2023, continues to face security challenges in 2024. While the total loss from last year’s hacks reached a staggering $2 billion, recent incidents suggest that the trend of digital heists hasn’t ended, leaving users concerned and experts scrambling for a fix.
2023: A Year of Substantial Losses and Notorious Hacks
In 2023, the cryptocurrency sector faced a total loss of approximately $2 billion due to hacks. Despite the drop from 2022’s staggering $3.8 billion in losses, it’s clear that security breaches remain a critical challenge for the crypto world.
In March, Euler Finance fell victim to a flash loan attack, losing approximately $197 million. Other platforms like Atomic Wallet and Multichain Bridge also encountered severe security breaches. The Atomic Wallet hack led to over $100 million in losses, while the Multichain Bridge attack resulted in a $126 million loss, contributing to the year’s substantial cumulative losses. In September, attackers gained unauthorized access to the centralized database of Mixin Network’s cloud service provider, costing users dearly—$200 million vanished in the blink of an eye.
On November 22, 2023, a further significant exploit occurred involving HTX’s hot wallets and the HECO Chain’s Ethereum Bridge, leading to a total loss of approximately $99.3 million in assets. The HECO Bridge, critical for transferring digital assets between the Huobi Eco Chain and other networks like Ethereum, became a vulnerability point.
The hot wallets affected included losses of 4.25 million KOK tokens and 2.19 million ARIX tokens, with the hacker overlooking a swap of $1.15 million worth of ARIX tokens. An in-depth analysis shed light on the sophisticated nature of the breach – it wasn’t a simple hack, but a calculated exploitation of vulnerabilities, with the exploit’s root cause being the compromised operator account. The incident patently spooked traders and investors, bringing back uneasy memories of the FTX collapse. According to DefiLlama data, the exchange also bore the brunt of the fallout, seeing a $258 million outflow in user funds post-incident (between November 25 and December 10).
2024: A Continuation of Security Woes
The cryptocurrency landscape in 2024 has been also marred by a series of high-profile security breaches, indicating an alarming continuity of the challenges faced in 2023. The year began with the Orbit Chain hack, a South Korean blockchain project that lost over $80 million on January 2nd due to vulnerabilities in multisig wallet management. This event was closely followed by the Radiant Capital compromise, which saw a loss of $4.5 million from a flash loan attack, demonstrating the persistent vulnerabilities in decentralized finance (DeFi) platforms.
As if in quick succession, Gamma Strategies and CoinsPaid also reported substantial losses of $3.4 million and $7.5 million, respectively, pointing to the systemic risks present within the crypto financial instruments and processing services. Even more distressing was the Socket.Tech exploit, which resulted in a $3.3 million loss, affecting numerous Web3 applications.
A Shift Towards Autonomy Amid Security Distrust
Looking into the latest Bitcoin Trading Volume Ratio data on KYC vs. Non-KYC platforms, the chart data confirms deep-seated unease among investors and the ongoing exodus from centralized platforms.
The chart shows the Bitcoin trading volume ratio for KYC versus Non-KYC platforms as of January 1, 2024, with a ratio value of 4.63 and a 30-day Simple Moving Average (SMA) of 4.26. On January 21, 2024, the trading volume ratio surged to 7.15, indicating a marked preference for non-KYC platforms among traders. This is further emphasized by the 30-day SMA, which stands at 5.91, reinforcing the upward trend.
The increase from a ratio of 4.63 to 7.15 reveals a clear trend towards traders opting for non-KYC offerings, typically available on non-custodial platforms.
Another chart also provides a stark visual of the community’s pivot away from centralized exchanges. As of January 21, 2024, the value of the Bitcoin Exchange Reserve stood at approximately $85.592 billion. This figure represents a significant drop from $98.150 billion as of January 8, 2024. This substantial decrease over a two-week period could be a sign that trust is waning.
While CEXs, who act as custodians of user assets, grapple with how to rehabilitate their reputations, there’s a growing trend toward non-custodial platforms. Their standout feature is that the user holds the keys—literally—keeping their digital assets out of anyone else’s reach. So, with direct control over their assets and a higher degree of security, users can have peace of mind as the risk of large-scale breaches falls to a minimum.
Closing Thoughts
As more people wise up to the perils of centralization, there’s a noticeable pivot to non-custodial options that put the user squarely in the driver’s seat of their digital assets. A bustling crypto exchange suddenly finding itself at the mercy of hackers should not be something that’s par for the course in today’s crypto world. It’s not just a matter of financial loss; it’s a profound violation of trust that rattles the very core of what we expect from crypto exchange security.
About the author: Maria Carola is the CEO of StealthEX.io – an instant, non-custodial cryptocurrency exchange with over 1,300 assets listed. After graduating the University of Vilnius, Maria spent almost a decade in the crypto space, working in marketing and management for a variety of blockchain projects – wallets, exchanges and aggregators.
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