The very essence of blockchain, the actual blockchain meaning, was to create a technology that was impossible to hack, thus reduce the number of crimes that take place in the online financial world. However, it appears that crooks can and will find a way to scam and steal.
A few hours ago, CNBC published a very interesting article on the gravity of crypto crimes in the last year. According to blockchain analysis firm Chainalysis, scammers all over the world made a whopping $14 billion in cryptocurrency, thanks mostly to the rise of DeFi platforms. The early stage of the crypto ecosystem and the emerging DeFi technology are packed with loopholes that were taken full advantage of last year.
DeFi aims to eliminate middlemen from financial transactions such as obtaining a loan. A code called “smart contract,” written on a public blockchain, executes the transaction directly with the customer after ticking off certain criteria, thus keeping banks and lawyers out of the transaction.
The use of DeFi to make financial and cryptocurrency transactions are on the rise. Chainalysis found that DeFi transaction volume grew 912% in 2021, sending prices of popular platforms on an upward trajectory. Ethereum, which has a circulating supply of around 118,350,847 BTC coins and a maximum supply of 21,000,000 ether coins, is a popular DeFi platform. Notably, the ETH-USD price has increased considerably over a matter of 5 years from around $9.9 in early January 2017 to $3692.54 as of yesterday, January 3, 2022.
However, this very decentralization is also opening doors to scammers, who are taking advantage of the lack of proper knowledge about DeFi among investors. A significant 21% of all the scams in 2021 exploited code vulnerabilities in DeFi, as per Chainalysis. Alarmingly, losses from crypto scams climbed 82% from 2020, touching $7.8 billion worth of cryptocurrency.
While these statistics highlight the rampant scamming issue that has gripped the crypto ecosystem, there is also another side to the coin. Chainalysis also acknowledged the massive decline in the use of false addresses in transactions in 2021. Only 0.15% of the total 2021 crypto transaction volume of $15.8 trillion involved illegitimate addresses.
As the world of cryptocurrencies gathers more technological strength, legitimacy, and investors, the crimes are becoming smaller in proportion, which gives us some hope for the future of crypto safety.
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