Cross-chain bridge thefts top $1 billion in 2022

Cross-chain bridge thefts top $1 billion in 2022

As investment in cryptocurrency increases, so does the incentive for criminal actors to exploit the DeFi (decentralized finance) space. Cross-chain bridge hacks have been the weapon of choice for crypto thieves in 2022. Bridge hacks have accounted for more than $1 billion in stolen funds this year, according to research from blockchain analytics and compliance firm Elliptic.

Cross-chain bridges allow assets to move between different blockchain protocols, meaning the networks contain a large concentration of crypto assets. The recent spate of bridge attacks has led some industry leaders to question whether the benefits of bridges outweigh their risks. A top analyst at Elliptic believes that bridge hacks are just growing pains that DeFi will eventually overcome.

Harmony, Sky Mavis and Wormhole all suffered blockchain exploits of over $100 million this year. Mudit Gupta, chief information security officer at Polygon, believes bridge insecurity is an industry-wide problem.

“Most hacks happen because companies don’t have proper security experts and don’t know what to do themselves,” Gupta said in a Twitter DM. “There are very few DeFi companies with [dedicated] security staff.”

DeFi protocols have proliferated rapidly over the past six years, but security infrastructure has not kept pace with the now over $900 billion industry. For this reason, hacks in the hundreds of millions are not surprising.

On April 1, a trader tweeted his fear that a major Harmony Horizon Bridge exploit would only require a hacker to obtain two of the protocol's five validation keys. In June, this exact scenario occurred - and Harmony was plundered for $100 million.

Vitalik Buterin, co-founder of Ethereum, believes that cross-chain bridges are inherently vulnerable to security breaches.

“Bridges’ fundamental security limits are actually a key reason why… I’m pessimistic about cross-chain applications,” Buterin wrote in a lengthy Reddit post from January. The influential founder further expressed his belief that assets should be held in the same blockchain ecosystem instead of being mixed between chains.

Tara Annison, Head of Technical Crypto Advisory at crypto research firm Elliptic, disagrees.

“We’re not going to live in a single-chain world,” Annison said. There will always be a need to move assets between blockchains, so “we shouldn’t characterize bridges as bad in general just because some have been hacked.”

Annison believes that bridge hacks are caused by the concentration of value within cross-chain bridges, not the bridges themselves.

“When you think of wars, you try to bomb bridges to stop the movement of goods and services,” Annison said. The recent cross-chain bridge hacks are not happening “because bridges are inherently weak infrastructure, but because they have a concentration of value.”

Annison believes all crypto assets come with risk, and Bridges is just the risk “flavor of the month,” after stablecoins in May and NFTs before that. Bridges should become more secure as protocols become more technologically sophisticated.

It remains to be seen whether market participants agree.

Sky Mavis' Ronin Bridge, compromised in April for $625 million, reopened this morning. According to Messari, nearly $9 million in assets have already left the chain.

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The post Cross-Chain Bridge Thefts Top $1B in 2022 is not financial advice.