The cryptocurrency world is currently in the eye of a storm. The world’s second largest cryptocurrency exchange, FTX recently turned a victim to hackers who stole over $600 million worth of cryptocurrencies. A report by Moody’s suggests that the crypto ecosystem’s design is what makes it so vulnerable to cyber risks. “We think that digital finance is especially vulnerable to cyber risk because of its extensive reliance on automated and novel software and applications, thereby allowing criminals to avail themselves of multiple strategies to steal funds,” said a Moody’s report on decentralised finance and digital assets. According to blockchain analytics company Chainalysis, cryptocurrency hackers have stolen over $3 billion so far in 2022. “High cyber risk harms the ecosystem because it weakens businesses’ credit quality, impedes widespread consumer adoption and increases financing costs,” the report said. At the centre of these hacks is DeFi, or decentralised finance, which uses smart contracts to offer financial instruments to customers. According to Chainalysis, DeFi protocols have gotten the attention of hackers, contributing to a vast majority of hacks in this year. From nearly 5% in 2018, DeFi protocols now account for over 90% of the hacks in 2022.
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