Over $2 Billion Stolen This Year In Blockchain Bridge Hacks Expose DeFi’s Achilles Heel

If 2018 was the Year of the Hack for centralized crypto exchanges, decentralized blockchain bridges seem destined to win that honor this year.

Over $1.9 billion was stolen in cross-chain hacks in the first half of 2022, according to a new blog post by crypto analytic firm Chainalysis.

Cross-chain bridges have come under fire in recent weeks for their vulnerability. At their core, bridges allow users to exchange one token for another, say BNBBNB
(Binance’s token) for ethereum; they are the key to expanding operability across blockchains.

“Having that interoperability is crucial,” says Kim Grauer, head of research at Chainalysis.

But in order to function, bridges must hold large amounts of both tokens. Such liquidity pools make them enticing to hackers. Bridges “allow for blockchains to talk,” says Grauer. “But we’ve also created these honey pots for malicious actors.”

“Regardless of how those funds are stored–locked up in a smart contract or with a centralized custodian–that storage point becomes a target,” she adds.

Their vulnerability may also be a result of DeFi growing too much, too fast. Cross-chain bridges, says Amit Dar, senior director of strategy at cybersecurity firm Active Fence, are “kind of afterthoughts.”

“Effective bridge design is still an unresolved technical challenge, with many new models being developed and tested,” adds Grauer.

Still, the bridges have become staples of decentralized finance, and as long as they remain vulnerable, hacks will also be commonplace.

“The promise of DeFi was that we could have trustless finance,” says Sam William, CEO of ArweaveAR
, a blockchain start-up behind the permaweb which aims to preserve Internet content. “But instead people have ended up trusting the marketing and subsequently trusting the code without verifying it.”

As DeFi grows, this “painful lesson,” as Grauer puts it, is costing users unprecedented amounts of money. Thefts in the first half of this year were up 58% from the corresponding 2021 period. “This trend doesn’t appear set to reverse anytime soon,”…