In 2022, hackers stole $1.4 billion using crypto bridges
Crypto investors have been hit hard by hacks and scams this year. One reason is that cybercriminals have found a convenient way to get to them: cryptobridges.
Bridges connecting networks to speed up token swaps are gaining popularity as a way to transact between blockchains. Using them, exchange participants bypass centralized exchanges – such connections are practically not protected.
According to Chainalysis, about $1.4 billion has been lost since the beginning of the year due to network bridge breaches. The amount stolen in bridge robberies represents 69% of all funds stolen in cryptocurrency crimes in 2022.
The biggest event was the theft of $615 million from Ronin, a bridge that supports the popular Axie Infinity game with non-fungible tokens that allow users to earn money while playing.
How crypto bridges work
When exchanging tokens from one blockchain to another, the investor contributes tokens to a smart contract, a piece of code in the blockchain that allows transactions to be executed automatically, without human intervention.
The cryptocurrency is then created in the intermediate blockchain in the form of a reverse token, which is a claim to own the original coin. After that, the token can be sold on another network.
Why is it profitable to attack the bridge?
To a large extent, this is due to careless design of the intermediate blockchain.
For example, the Harmony Horizon bridge hack was made possible by the limited number of validators needed to approve transactions. Hackers only needed to compromise two of the five accounts to obtain the passwords needed to withdraw the funds.
A similar situation happened with Ronin. Hackers only needed to convince five of the nine validators in the network to share their private keys to gain access to the cryptography.
In the case of Nomad, attackers could enter any value into the system and then withdraw funds, even if there were insufficient assets on the bridge blockchain. They didn’t even need any programming skills, and the exploits they used led to imitators.
Why do people continue to use cryptobridges?
Without bridges, tokens are simply locked in their blockchains. In a situation of rapid development of the cryptocurrency sphere, fast exchange between different encryption chains is vital.
At the same time, the bridges are practically unmanageable and not regulated in any way. The turnover of ‘dirty’ cryptocurrency, whose owners are determined to avoid legal channels of exchange, amounts to billions of dollars. Currently, the crypto-society and governments are faced with the question of starting to regulate the activities of crypto-bridges, by analogy with the regulation of stock exchanges.
