A total of $2 billion worth of cryptocurrency has been lost to cross-chain bridge hacks so far this year, according to Chainalysis. The Chainalysis report also mentioned that cross-chain bridge hacks account for 69 percent of the total crypto hacks that have happened this year, making it the worst in crypto history.
Cross-chain bridges play a vital role in the crypto space. This is because they help connect the world of crypto by creating a network that brings together independent blockchains and allows them to be able to transfer assets and information easily and seamlessly.
According to Chainalysis’ report, the first quarter of this year saw the most crypto hacks since 2021. Almost $1.5 billion worth of cryptocurrencies were stolen in the first quarter and 75 percent of these hacks were bridge hacks. One of the most memorable hacks that took place in the first quarter was the attack on Ronin Network. In March, $625 million worth of Ether (ETH) and USD Coin (USDC) were lost to hackers.
You may wonder why “bridges” are important in the world of cryptocurrencies. Bridges are important because, just as the name implies, they create a bridge between blockchains. Let’s try an example! It is impossible to use Bitcoin (BTC) on the Ethereum network and vice versa. A crypto bridge, therefore, connects, two (or more) blockchain ecosystems and makes the transfer of assets and information possible.
Chainalysis explained in its report that as cross-chain bridges continue to grow in function and usage, they become more attractive victims to hackers. In its report, the research firm said that the colossal amount lost to hackers so far is a “significant threat to building trust in blockchain technology.” Chainalysis also added that bridges have become the top targets for North Korean hackers who have been blamed for a handful of recent hacks. Chainalysis estimates that these North Korean hackers have stolen cryptocurrencies worth about $1 billion from cross-chain bridges and DeFi protocol hacks, which represents 50 percent of cryptocurrency so far this year.
In its report, Chainalysis went on to explain that bridges make fine victims for hackers because they have a central storage point of funds that serve as backing to assets on the receiving blockchain. “Regardless of how those funds are stored, locked up in a smart contract or with a centralized custodian, that storage point becomes a target,” the research firm wrote.
Efforts are, however, being made to tackle this problem of hackers. Experts have begun to test new and effective bridge designs and for now, many of these remain in development or are being tested.
Chainalysis emphasized the importance of finding a lasting solution in its report. “A valuable first step towards addressing issues like this could be for extremely rigorous code audits to become the gold standard of DeFi, both for those building protocols and for the investors evaluating them. Over time, the strongest, safest smart contracts can serve as templates for developers to build from,” it wrote. The firm stressed that cryptocurrency companies and services providers including bridges should ramp up efforts against hackers by investing in security upgrades.