Cryptocurrencies were once touted to be the next big thing in financial services, but the risks they bring are nothing new — wherever there is money, raiders are bound to prowl. Exhibit 2 showcases a glimpse of the biggest hacks in the crypto ecosystem in 2022.

In October 2022 alone, $718M has been stolen from DeFi protocols, pushing the gross value to over $3B and putting 2022 on track to be a record year for hacking, according to blockchain specialist Chainalysis’s tweet. Attackers exploited vulnerabilities in smart contracts and protocols, particularly cross-chain bridges and flash loan protocols, to commit the biggest crypto attacks of 2022. While most CeFi platforms were the victims of shutdowns, DeFi players were the hardest hit when it came to crypto hacks. Hackers were able to successfully break into its code, security, and structure.

The DeFi ecosystem cannot attain its full potential if the very decentralisation that makes it so dynamic is also responsible for widespread scams and thefts. A proactive approach to smart contract security is the best way for most DeFi projects to ensure their names do not appear in the headlines.

Tussle with the “Trustless”

Crypto was built on the concept of “trustlessness”, i.e. cryptocurrency transactions and holdings don’t require trust from third parties, such as governments, central banks, or other financial intermediaries.

Today, cryptocurrency’s trustless aspect appears to be under a massive strain. In order to prevent exploiters from setting up shop in this space, either regulation must be enacted, or the infrastructure must be powerful enough to deter their activities. Probably both are the need of the hour.

It will be interesting to see how regulators clamp down on the bad actors in the crypto ecosystem and how the industry manages the rising pressure of consumers’ distrust, investors’ pessimism, and regulatory scrutiny. 2023 is expected to be a year when the crypto industry would need to brace for courtroom depositions, contagion risks, and clean-ups.