While cryptocurrencies gained popularity over the years, hackers have specifically targeted it to exploit weaknesses in crypto-transactions. Chainalysis, a company that analyzes blockchains, has published research that shows that about $2 billion worth of cryptocurrency was stolen in 13 separate hacks on cross-chain bridges.
The company said that most of the $2 billion had been stolen this year, with 69 percent of the cash stolen in 2022 so far coming from attacks on bridges. It was also said that the theft could make people less likely to trust blockchain technology.
Cryptocurrency allows users to take back control of their finances by letting them act as their own bank while using third-party wallet providers. However, cybercriminals have taken advantage of this third party over the last few years.
The research said, “As more value flows through cross-chain bridges, they become more attractive targets for hackers.” Even more troubling is that bridges are now a top target for North Korean-linked hackers, who — according to our estimates — have stolen approximately $1 billion worth of cryptocurrency so far this year, entirely from bridges and other DeFi protocols.
For perspective, South Korea’s government-run statistical agency estimates the country earned $89m from official exports in 2020. The good news is that these services can take steps to protect themselves. And in the event of a hack, they can leverage the transparency of blockchain technology to investigate the flow of funds and ideally prevent attackers from cashing out their ill-gotten gains.
Bridge Hacking Could Lead to a Loss
Cross-chain bridges were made because it was hard for different blockchains to work together, a problem that needed to be fixed. In the white paper, a “cross-chain bridge” describes how a user moves digital assets from one blockchain to another. It was said that these bridges are attractive targets because they often have a central location where the funds that back the assets that are “bridged” on the receiving blockchain are kept.
This year has devastated crypto investors as hacks and scams struck record highs. Because hackers have found a very effective way to contact people, specifically through bridges.
Blockchain bridges are becoming increasingly popular as a means of transaction for cryptocurrency users. These bridges flimsily connect networks to allow for quick token swaps. But by using them, people who like cryptocurrencies avoid a centralized exchange and use a system that is insecure.
In an interview, Tom Robinson, co-founder and chief scientist at blockchain analytics firm Elliptic, said, “Blockchain bridges have become the low-hanging fruit for cyber-criminals, with billions of dollars’ worth of crypto assets locked within them.” “These bridges have been breached by hackers in various ways, suggesting that their level of security has not kept pace with the value of assets they hold.
Considering how recent this problem is, the frequency with which bridges are being exploited is terrifying.
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How The Bridge Works in Crytocurrency Transactions
A piece of software called a bridge enables users to send tokens from one blockchain network and receive them on another. The distributed ledger technologies that support different cryptocurrencies are known as blockchains.
When an investor wants to move tokens from one blockchain to another, for example, by sending ether from Ethereum to the Solana network, they must first deposit the tokens into a smart contract. A smart contract is a piece of code stored on a blockchain, making it possible for agreements to be carried out automatically without human intervention.
After that, the cryptocurrency is “minted” on a new blockchain in the form of a wrapped token, representing a claim on the original ether coins. This claim may then be used to purchase further ether coins. After that, the token will be able to be traded on the new network. Investors who use Ethereum, which is renowned for unexpected jumps in transaction fees and higher wait times when the network is congested.
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The Bridge Hack
CNBC explained that “the vulnerability of bridges can be traced in part to sloppy engineering.”
It also says that the attack on Harmony’s Horizon bridge was possible because the minimum number of validators needed to approve a transaction was low. Hackers only had to get into two of the five accounts for them to be able to take funds out of the compromised accounts.
Ronin was involved in a circumstance that was very similar. Hackers only needed to convince five of the nine validators on the network to give up their private keys to access the encrypted data that was locked up in the system.
In the case of Nomad, the bridge made it much easier for hackers to change the system. Attackers could put any amount of money into the system and then take money out, even if there weren’t enough assets in the bridge to cover the amount of money they put in. They didn’t need to know how to code, and others copied them. This led to the eighth-largest crypto heist in the industry’s history, according to Elliptic.