The Web3 industry lost billions to crypto fraud last year
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Companies and individuals working in the Web3 industry lost nearly $4 billion to fraud and cybercrime last year, a new report found.
Web3 is the idea behind a possible next version of the internet, built on decentralized solutions, blockchain and token-based economy. It has risen to prominence in recent years, following the explosive growth of Bitcoin, Ethereum, and other blockchain solutions, despite few tangible returns to date.
As more organizations started building new systems, fraudsters quickly came out of the woodwork, and now Web3 bug bounty provider Immunefi has claimed that exactly $3,948,856,037 worth of cryptocurrencies will be lost in the Web3 ecosystem by 2022 due to fraud, hacks and scam.
Improving security
The majority of the incidents occurred on the BNB Chain (Binance chain – 65 incidents) and Ethereum (49).
The silver lining, the researchers say, is the fact that overall losses have fallen by more than half (51.2%) year-over-year. By 2021, the industry had lost $8,088,338,239.
However, the constant battle against fraudsters is not slowing down the growth of the industry. Immunefi expects it to grow from $3.2 billion last year to $81.5 billion over the next seven years, up 43.7% CAGR.
“Web3 is still a whole new world, full of unknown paths,” said Mitchell Amador, Founder and CEO of Immunefi. “That novelty, by definition, brings a level of inexperience and danger to the game. In addition, due to the nature of the Web3 ecosystem, where smart contract code contains huge amounts of capital, the environment is much more hostile than traditional Web2 applications.”
To safely navigate these uncharted waters, CISOs and other security leaders need to invest in security education, Amador recommends. That education must go beyond endpoint protection (opens in new tab)phishing and social engineering, in things like cryptocurrency wallets, private keys, and common DeFi (Decentralized Finance) applications.
Alex Mashinsky, former CEO of failed cryptocurrency lender Celsius, was recently charged with fraud by the New York Attorney General, in just one of many cases of crypto companies going bankrupt last year. In addition to Celsius, FTX, 3 Arrows Capital, BlockFi and many others were forced into bankruptcy proceedings last year.
Through: Venture Beat (opens in new tab)