2021 Cryptocurrency Security Review: Over 600 REKT incidents occurred, with a total theft amounting to 2.2 billion USD
In the world of cryptocurrency, REKT comes from the English word "wrecked," which originally means "destroyed." The term refers to a project being attacked.Author: Footprint
In the world of cryptocurrency, REKT (derived from the English word "wrecked," originally meaning "destroyed," the term refers to projects that have been attacked) currently has four main attack methods:
Exit Scam: Refers to a project running away with funds during or after its launch.
Honeypot: Refers to enticing investors to deposit funds into a smart contract project that contains hidden traps and is unstable. Once the funds are deposited, only the project team can unlock the locked assets.
Exploit Attack: Refers to attacks initiated by exploiting vulnerabilities in DApps, networks, or smart contracts.
Flash Loan Attack: Refers to attacks initiated by combining flash loans with other vulnerabilities to conduct arbitrage and manipulate prices.
According to data from Footprint Analytics, over 600 projects were REKT in 2021, with one-third experiencing financial losses totaling $2.2 billion.
Footprint Analytics: REKT Overview in 2021
Compared to 2020, about 450 new projects were hacked, resulting in ten times the financial losses. From further data comparisons and analyses, this article has the following findings.
Footprint Analytics: Yearly REKT Number & Fund
Finding 1: Exit Scams and Honeypots are the most common cryptocurrency scam methods. In 2021, Exit Scams and Honeypots accounted for 50% and 30% of all scams, respectively. Compared to the previous year, the proportion of Honeypots increased by 16%.
Footprint Analytics: Number of REKT by Type, Yearly Comparison
Footprint Analytics: Distribution of REKT by Type, Yearly Comparison
Most Exit Scams occurred between August and September, primarily on the BSC and Polygon blockchains.
Footprint Analysis: Monthly Exit Scams by Chain
As for Honeypots, September was the month with the most severe occurrences, especially on the BSC chain, accounting for nearly 70% of such scams.
Footprint Analysis: Monthly Honeypots by Chain
Finding 2: Attacks occurring on BSC accounted for 53% of the total.
Compared to the previous year, the number of attacks on BSC increased from 9 to 319; the new chain Polygon in 2021 was also affected by 12%.
Footprint Analytics: Number of REKT by Chain in 2020 (left) and 2021 (right)
Exit Scams and Honeypots are the two main types of attacks on projects on the BSC chain. Notably, Exit Scams concentrated in August, when BSC was experiencing a surge in the number of projects and the accumulation of locked funds; deeper reasons will be analyzed later in this article.
Footprint Analytics: Number of REKT by Type of BSC
Finding 3: 67% of financial losses occurred on Ethereum.
Although most attack incidents occurred on the BSC chain, more funds were lost on Ethereum, primarily through Exploit Attacks and Flash Loan Attacks. Compared to 2020, the amount of funds lost on Ethereum increased by 500%.
Footprint Analytics: Fund Lost Amount by Chain & Type in 2020
Footprint Analytics: Fund Lost Amount by Chain & Type in 2021
Here is a list of attacks ranked by financial loss:
Poly Network was the largest victim of hacks in 2021, with a vulnerability attack in August resulting in a loss of $602 million. The largest victim of a flash loan attack was Cream Finance, which suffered a cumulative loss of $130 million in October.
Footprint Analytics: Attacks Causing Losses of More Than $50M
Why Were Scams and Attacks So Rampant in 2021?
One reason for the increase in the number of attacks is the rapid growth of blockchain DApps and the explosion of public chains. As of December 31, 2021, the number of DeFi protocols reached 977, deployed across 86 public chains.
Footprint Analytics: TVL of All DeFi Protocols
Footprint Analytics: Number of DeFi Protocols
Another reason is that more and more hackers have noticed the increasing amounts locked in blockchain projects, with the total locked value exceeding $270 billion by the end of 2021.
Why Are the REKT Incidents on BSC the Most?
As a "Layer 2" public chain of Ethereum, most projects on BSC are established as forked versions of the Ethereum protocol, many of which have made minor innovations without a deep understanding of the original protocol. Some belong to pump-and-dump projects with no long-term development plans, directly copying code.
These factors make forked projects with similar code structures vulnerable to attacks. As long as hackers are patient enough to find vulnerabilities in one of the protocols and wait for the accumulated funds in these similar projects to become attractive enough, they can attack this series of forked projects.
Additionally, the gas fees on BSC are very low, making the cost of attacks on BSC much lower than on Ethereum.
Footprint Analytics: TVL of BSC in 2021
Footprint Analytics: TVL of BSC in 2021
How to Avoid Being REKT
In 2021, more and more people entered the cryptocurrency world.
Some bought tokens, some invested in DeFi projects, and others spent large sums on expensive NFTs, even paying a premium in the metaverse to be neighbors with real-life celebrities. The increasingly widespread decentralized network activities mean more hacking, scams, and attacks.
Therefore, DeFi developers should pay more attention to security awareness, such as conducting logical checks on code, eliminating possible vulnerabilities, and seeking help from professional auditing teams.
As the booming blockchain industry attracts more bad projects, investors will need to conduct more due diligence. If you are just starting to invest in projects in the cryptocurrency world, please be aware of the following:
New projects offering excessively high rewards may have skyrocketing token prices due to manipulation by the project team.
Be cautious of suspicious links in communities, private messages from strangers, or even search engine results, as these could lead to phishing traps.
Airdrop tokens claiming astronomical returns often require staking valuable assets to redeem.
The only way to avoid being REKT is to stay calm and have a thorough understanding of the projects.
