Cross-chain bridge hacks will account for 69% of all stolen cryptocurrencies in 2022, with losses reaching $2 billion.
The report was published by blockchain analytics firm Chainalysis on August 2nd.Announcedpoints out that there have been 13 token bridge hacks this year, most recently the $190 million Nomad bridge incident.
The first quarter of 2022 was the quarter with the most cryptocurrencies stolen since 2021. An attack on the Ronin bridge in late March stole $624 million worth of Ether (ETH) and USD Coin (USDC).
Following last night’s exploit of the Nomad Bridge, an estimated $2B has been stolen from cross-chain bridges so far in 2022. Read our blog to learn what makes these protocols vulnerable and what the industry can do about it. https://t.co/WLo62H6NFe pic.twitter.com/CZRnqrPikh
— Chainalysis (@chainalysis) August 2, 2022
A cross-chain bridge, also known as a blockchain bridge, is designed to transfer cryptocurrencies from one blockchain network to another.
Chainalysis explains that while bridge designs vary, users typically deposit tokens from one chain into the bridge protocol, which locks them into a contract. After that, users will be issued equivalents of parallel tokens on another chain.
Bridge vulnerability
According to a Chainalysis report, “Bridges are often targeted because they have a central custodial point for the funds that back the ‘bridged’ assets on the recipient’s blockchain.”
“Whether you store your money in a smart contract or a centrally managed custodian, it becomes a target wherever you store it.”
Effective bridge design is still evolving, some experts say, and some developers have a relatively poor understanding of security protocols, which are easy for hackers to abuse.
Posted on Twitter almost two weeks before the most recent attackTweet on July 22ndNomad founder James Prestwich says it will take at least another year or two to get familiar with the entire chain security model enough to build standard defenses.
“Cross-chain systems have not yet accumulated know-how about attacks, and people don’t know what common attacks are, so they can’t defend against them.”
Centralized exchanges were once popular targets for hackers, but advances in security protocols have made cyberattacks less successful, according to Chainalysis.
Cryptocurrency services, including Chainalysis and Bridge, should start investing in security upgrades and training as soon as possible.
“A valuable first step in addressing issues like this could be that very rigorous code audits become the DeFi gold standard for both the people building protocols and the investors evaluating them. Over time, the strongest, most secure smart contracts will act as templates for developers to build.”
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