Cross-Chain Crypto Bridge Hacks Hit $2 Billion: Chainalysis

Blockchain scouts Chainalysis estimates that more than two-thirds of all stolen funds across the crypto space have come from cross-chain bridge hacks this year.

This type of attack refers to exploits or hacks that occur on so-called bridge protocols that connect different blockchains.

In a recent reportThe firm said bridge thefts have amounted to $2 billion worth of stolen funds, posing a “significant threat” to the credibility of blockchain technology.

This analysis comes in the wake of Monday’s Nomad hack, which saw $200 million wiped from the bridge platform. Nomad acts as a path between different blockchains, so that investors can move their funds between blockchains such as Ethereum, Avalancheand Moonbeam (GLMR) platforms.

The Nomad robbery also represents seventh great hack for crypto bridges this year, asking the question: What makes them such an eye-catching target?

Crypto bridges and liquidity

According to Arda Arkantura, a threat analyst at crypto data and compliance firm Elliptic, the problem with cross-chain bridges is their liquidity.

“You freeze a token on one side of the blockchain and unlock it from the other side. This means you have a lot of liquidity and smart contracts with funds stored on them,” says Arkantura. “In crypto, when something is liquid, it’s lucrative.”

These cross chain bridges have been so lucrative that cross-chain hacks have accounted for 13.5% of all theft in decentralized applications (dApps), according to Elliptic.

In March, blockchain gaming company Axie Infinity also experienced a $622 million hack Ronin side chain, which connects it to the Ethereum network, succumbed to theft. A month before the Ronin heist, Wormholea bridge connecting Ethereum and Solana was stripped of $320 million dollars.

Chain analysis also suggests that cross-chain bridges have become prime targets for activist or terrorist hacks, with criminals from North Korea reportedly stealing around $1 billion worth of crypto this year.

The irony of cross-chain bridges is their prevalence within DeFi ecosystem. By centralizing smart contracts with funds and transactions written on them, they provide a focal point for criminals to exploit.

“It’s an interesting paradox,” says Arkuntura.

“There are some individuals who will say that centralization for smart contracts allows them to solve problems immediately [on the bridge]. On the other hand, centralization makes it much easier for illegal actors,” he added.