In the third quarter, crypto losses recorded ran into a total of $428,718,083 million, according to Immunefi’d Crypto Losses Q3 report. Crypto losses in the third quarter are down 36 percent from the $670,698,280 recorded in the second quarter, and down 62.9 percent from the $1,155,334,775 recorded in the year-ago period. The report takes into account losses derived from the combination of hacks and alleged frauds, according to Immunefi’s Adrian Hetman, tech lead of the triaging team at Immunefi.
Immunefi noted that most of the losses recorded in the quarter were derived from two specific incidents involving cross-chain messaging protocol Nomad and crypto market maker Wintermute. They both lost $190 million and $160 million respectively, and represent about 80 percent of total losses recorded in the third quarter.
The report also noted that crypto losses have continued to decline consecutively in the last three quarters. It, however, is still difficult to say that this trend will continue for the rest of the year. “It’s too soon to understand if there’s a definitive trending decline in crypto losses. There are many more reasons for this decrease, such as developers getting more experienced, or bug bounties and security innovations that were brought to the market helping prevent and save the space from countless losses,” Adrian Hetman said.
He added that it is still too early to determine a cause for the declining crypto losses. “The reality is that hacks are still happening, and still incredibly high-value ones such as Nomad and Wintermute, so it’s important to keep investing in security,” he said.
Talking more about why the value of losses has continued to reduce this year from the year-ago period, he said that“Over this period we’ve seen more well-established protocols standing the test of time and becoming safer, while poorly managed projects, often carrying low-security standards, are disappearing on the back of the bear market. Such projects would have been easy attack targets, likely to suffer more losses during this period.”
More people are expected to come into the crypto space and will be unable to distinguish between what is real and what is not, this way losses are bound to occur, Adrian Hetman noted adding that “Promises being made by some of the projects or fraudsters can be appealing. Who wouldn’t want to have 30% APY or getting rich quick, or having the NFT of the next big thing in crypto? Sadly, people are being greedy, and when there is greed, there is always a way for scammers to exploit that.”
Greed wouldn’t be the only thing that’ll fuel these losses. “With more people joining the space, we’re noticing broader fraud deployed for unexpecting users who don’t know what to expect from web3 and are more willing to click on malicious links or sign a malicious transaction. That’s why crypto security education is important. As more people and developers are aware of certain social engineering techniques, the web3 space will only benefit from that.”
While frauds only account for about 7 percent of crypto losses, hacks continue to be the largest reason for these losses. Hacks accounted for 93 percent of crypto losses in the third quarter, down from 97 percent in the second quarter.
“Fraud, rug pulls and scams are taking more time, and the reward compared to smart contract hacks isn’t that high. To carry out fraudulent activity, it’s necessary to actually create a project, make sure it looks solid and legitimate, attract users and hopefully get millions of dollars locked down first,” Adrian Hetman said.
He also noted that it will take time for proper safety and security protocols to come into play and protect crypto assets.
Meanwhile, in the third quarter, the sales of non-fungible tokens (NFTs) declined as much as 60 percent from the second quarter, according to blockchain tracker DappRdar. This decline comes as the interest in cryptocurrencies continues to decline and investors show little interest in the speculative assets. NFTs raked in $3.4 billion in sales, a decline from the $8.4 billion in the second quarter and the first quarter’s peak of $12.5 billion.