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DeFi Protocols Must Adopt Better Security Standards as North Korea-Linked Hackers Steal $1.7 Billion

In a stark reminder of the importance of minimum security standards in decentralized finance (DeFi) protocols, hackers linked to North Korea have stolen an estimated $1.7 billion worth of cryptocurrency in 2022, with a significant portion of that amount coming from DeFi hacks.

The Lazarus Group’s Tactics

The Lazarus Group, a cybercriminal syndicate, has been responsible for some of the most prolific cryptocurrency hacks in recent years, and their latest haul is a record-breaker. Their tactics often involve hacking DeFi protocols, which are then used to launder stolen funds by swapping illiquid tokens for more liquid assets.

The Role of DeFi Protocols

While DeFi protocols may not be the most effective means of money laundering due to their increased transparency, hackers have turned to them as a convenient way to offload large quantities of stolen cryptocurrency. In fact, $1.1 billion of the total stolen amount was pilfered from DeFi hacks alone.

Laundering Funds

The hackers’ preferred method of laundering these funds is by sending them to mixers, which are designed to obscure the origin and destination of cryptocurrencies. However, following the OFAC designation of Tornado Cash in August 2022, North Korea-linked hackers have diversified their mixer usage, with a significant portion of funds now being sent to Sinbad.

The Need for Better Security Standards

Sinbad, a relatively new custodial Bitcoin mixer, has been used by North Korea-linked hackers to launder approximately $24.2 million worth of stolen cryptocurrency since December 2022. This highlights the need for DeFi protocols to adopt better security standards and for regulators to take action against mixers that facilitate illegal activities.

Law Enforcement Efforts

While law enforcement agencies are working to combat these hacks and seize stolen funds, the transparency of the blockchain provides a valuable trail for investigators to follow, even years after the fact. As investigative techniques improve over time, it is likely that more such seizures will occur in the future.

Recommendations for DeFi Protocol Developers

To prevent hackers from exploiting vulnerabilities, DeFi protocol developers must prioritize security and adopt minimum standards. Here are some recommendations:

  • Implement robust security measures, such as multi-factor authentication and regular software updates.
  • Conduct thorough vulnerability assessments and penetration testing to identify weaknesses.
  • Use secure communication protocols and encrypt sensitive data.
  • Monitor transaction activity and report suspicious behavior to authorities.
  • Consider implementing know-your-customer (KYC) procedures to verify user identities.

Conclusion

By prioritizing security and adopting these best practices, DeFi protocol developers can help protect the ecosystem from threats like those posed by North Korea-linked hackers and ensure a safer and more secure environment for users.