DeFi Protocols Must Adopt Better Security Standards to Prevent Hackers from Stealing Billions

In 2022, North Korea-linked hackers stole an estimated $1.7 billion worth of cryptocurrency across several hacks, shattering their own records for theft. This staggering figure has raised concerns about the security of decentralized finance (DeFi) protocols, which have been targeted by these hackers.

The Stolen Funds: A Major Concern

According to Chainalysis investigators, a significant portion of the stolen funds - approximately $1.1 billion - was pilfered from DeFi protocols. The hackers then sent most of this illiquid cryptocurrency to other DeFi protocols, including decentralized exchanges (DEXes), in an effort to swap it for more liquid assets.

Experts’ Concerns: North Korea’s Nuclear Weapons Programs

Experts agree that North Korea’s government is using these stolen funds to finance its nuclear weapons programs. This highlights the urgent need for DeFi protocols to adopt better security standards to prevent such massive thefts.

The Rise of Mixers: A Growing Concern

In addition to targeting DeFi protocols, North Korea-linked hackers have also been known to send large sums to mixers, which are used for money laundering. According to Chainalysis data, funds from hacks carried out by these hackers move to mixers at a much higher rate than those stolen by other individuals or groups.

Sinbad: A New Threat

Chainalysis investigators first observed wallets belonging to North Korea-linked hackers sending funds to Sinbad, a relatively new custodial Bitcoin mixer that started advertising its services on the BitcoinTalk forum in October 2022. During this period, these hackers sent approximately 1,429.6 Bitcoin worth $24.2 million to the mixer.

The Need for Vigilance

The use of Sinbad highlights the need for DeFi protocols to stay vigilant and adapt to new threats. As law enforcement agencies improve their investigative techniques and agencies like OFAC cut off hackers’ preferred money laundering services, it is essential that DeFi protocols prioritize security to prevent future hacks.

Conclusion

The data on DeFi hacks makes one thing clear: Whether achieved through regulation or voluntary adoption, DeFi protocols will greatly benefit from adopting better security standards. The recent events highlight the urgent need for DeFi protocols to stay ahead of hackers and ensure the integrity of their systems.

Prioritizing Security

As the cryptocurrency ecosystem continues to grow, it is crucial that DeFi protocols prioritize security to prevent massive thefts like those carried out by North Korea-linked hackers. By doing so, they can ensure the long-term success and penetration into the mainstream of decentralized finance.