In the crypto world, there are 4 main ways to earn REKT (“experiencing significant financial loss due to suspicious misconduct” in crypto terms).
- A exit scam it is a project that simply vanishes with investors’ money during or after its launch.
- TO jar of honey lures investors into vulnerable contracts that contain hidden traps that lock their assets
- A exploit attack exploits vulnerabilities in applications, networks and operating systems.
- TO flash loan attack It involves getting a quick loan (a form of unsecured loan) from a lending protocol and manipulating the market in your favor.
According to Footprint Analytics, more than 600 projects obtained REKT in 2021. A third of these were registered to find lost funds, accumulating the amount of $2.2 billion.
Compared to 2020, approximately 450 more projects were hacked, resulting in the loss of 10 times more funds. As for the data, here are the results.
Finding 1: Exit Scams and Honeypots Were the Most Popular Crypto Scams
Exit scams and honeypots accounted for 50% and 30% of all scams in 2021, respectively. Compared to the previous year, the percentage of honeypots has increased by 16%.
Most of the exit scams occurred between August and September, mainly at BSC and Polygon.
Regarding honeypots, September was the most severe month, especially in BSC, accounting for almost 70% of this type of scam.
Finding 2: BSC made up 53% of REKT attacks
Compared to the previous year, the number of attacks on BSC increased from 9 to 319. Polygon, a new blockchain in 2021, also received 12% of the worst part.
Exit scams and honeypots were the two main types of attacks against BSC. It is worth noting that the former had a big bang in August, probably due to the rapid growth in the number of projects in BSC and the funds accumulated in these projects. This will be explained later in the article.
Finding 3: 67% of all lost funds occurred on Ethereum
Although most of the attacks occurred on BSC, more funds were lost on Ethereum, mainly through exploitation attacks and flash loans. The amount of money lost grew by 500% compared to 2020.
Here is the list of fund loss attacks:
Of the previous attacks, 50% of them have lost between $10,000 and $1 million of funds, another 35% were between $1 million and $50 million.
Poly Network was the biggest victim of all, losing $602 million to an exploit in August. The biggest victim of the flash loan was Cream Finance, where $130 million was lost.
Why are scams and attacks thriving in 2021?
One of the reasons for the increasing number of attacks stems from the rapid growth of blockchain DApps. The current number of DeFi protocols reached 977 across 86 chains.
Another reason is that more and more hackers have noticed the rise of TVL from crypto and blockchain projects.
Why did BSC see the most attacks?
Most projects on BSC, a Layer 2 chain to Ethereum, have been built simply by forking the Ethereum protocols. Many of these have little innovation, long-term development plans, or an understanding of the basic logic behind the code.
These factors make projects vulnerable to hackers, who can easily discover loopholes in a protocol. Once the TVL accumulated in similar projects grows enough, it’s time for them to make attacks.
Also, the low gas fees at BSC make carrying out attacks much more feasible.
Thoughts on not getting REKT
In 2021, more and more people entered the crypto world.
Some bought some tokens, some invested in DeFi projects, and some still bought NFTs, or even moved in next door to celebrities in the metaverse. Widespread adoption of this technology means more hacking, scams, and attacks.
Therefore, DeFi developers should focus more on security awareness, such as performing logical checks on code to rule out potential vulnerabilities and seeking help from professional audit teams.
Investors will need to do more due diligence as the thriving blockchain industry attracts more bad actors. If you’re just starting out, watch out for:
- Projects with crazy incentives.
- Suspicious links in group chats, direct messages from strangers, or search engine results. Never send your private key or seed – This is the most important rule to protect yourself from phishing attacks.
- Airdrops that claim to give you astronomical returns for your tokens.
The only way to not have REKT is to stay calm and think clearly.
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Date and author: January 13, 2022, [email protected]
Data source: REKT overview in 2021
This article is part of our Year in Review series.
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