A new report suggests that around $2B in crypto stolen from cross-chain bridges this year alone. The report was released on Tuesday by Chainalysis, a blockchain analytics firm. The report noted that over 13 token bridge hacks have occured in 2022 so far, with the most recent one resulting in a $190 million Nomad Bridge exploit. According to the report, the first quarter of 2022 witnessed the largest amount of crypto stolen since 2021. The first quarter was faced with the loss of $624 million in Ether (ETH) and USD Coin (USDC) due to the Ronin Bridge Attack in late March.
Cross-chain bridges are a practice where authorized users transfer crypto coins from one blockchain to another for monetary gains. Chainalysis explains that crypto users typically deposit their assets on one chain and then lock into a contract. The blockchain then issues the equivalent of a parallel token in another chain to the user.
The Chainalysis report explains that cross-chain bridges usually occur because bridges have a point where funds that back the ‘bridged’ assets are stored 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 Chainalysis report noted.
Industry experts say effective bridge design is still in its nascent stages of development; plus, developers have little or no understanding of how crypto bridges operate, making the bridges vulnerable to attacks. Nomad founder, James Prestwich, posted a clip on Twitter saying “in cross-chain systems, we haven’t built up that kind of expertise about attacks yet, people don’t know what the common attacks are, and so they don’t defend against them.” His post came barely two weeks before the recent cross-chain bridge. In related reports, Discord Hackers Reportedly Stole $22 Million Worth of NFT Projects
Before now, hackers usually targeted centralized exchanges, but technological and security protocols advances have discouraged hackers from successfully launching an attack on exchanges, according to Chainalysis. Crypto services globally should deploy resources to invest in training and security upgrades as soon as possible, the blockchain analytics firm stressed. “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,” the Chainalysis report noted.