- A total of $1.4bn hacked from crypto bridges so far this year
- Popular altcoins targeted as hackers target security loopholes
- Weaknesses in bridge systems jeopardise the expansion of the crypto framework
Gaping holes in crypto security have been highlighted by a major shift by cybercriminals who are now targeting crypto bridges. It’s a case of a ‘work around’ style process that, at face value, makes life easier for coin holders. However, using bridges comes at a massive potential cost.
The $1.4bn stolen from bridges so far in 2022 has been in the form of fewer but larger hacks. That means that not only do individual investors take a massive hit, but some popular crypto blockchains are left exposed and have to answer tricky questions about security protocols.
The Ronin bridge supports the highly rated Axie.Infinity altcoin blockchain and has reported $615m in fraudulent withdrawals. Harmony’s Horizon bridge suffered a $100m hack in June, and in early August, approximately $200m was seized by hackers who compromised the Nomad blockchain.
How Crypto Bridges Work
One of the crypto landscape’s strengths and weaknesses is the blockchain technology on which it is built. On the plus side, the decentralisation protocols ensure that each blockchain has an effective and transparent way of accurately reporting holders’ accounts. The downside is that transferring coins from one platform to another can be costly and time-consuming.
Bridges were set up to make transfers between blockchains more user-friendly. They are a software package which allows investors holding one coin, for example, Ether, to switch their position to another, such as Solana. That’s not a bad idea in principle, considering the incredible price moves in respective coins. The challenge facing the industry is establishing how to do it safely and efficiently.
Bridges use smart contracts, a piece of code, to execute the transaction automatically and avoid any need for human intervention. When it works well, the process can be cheaper and faster than using a specialist crypto exchange, but the security loopholes in that code have at times been unpicked by fraudsters.
Possibly of most concern is that those ‘security loopholes’ appear to be down to a lack of diligence shown by bridge operators. In the case of the Ronin hack, only five out of nine validators on the network had to be compromised. Harmony’s protocols enabled hackers to clear out accounts if they controlled only five of nine validators.
Why Are Crypto Bridges Important?
Crypto bridges offer a way for the crypto space to move to the next level. A system which accommodates seamless movement between crypto blockchains would be one which looks much more like the fiat currency network that cryptos are trying to replace. As a result, there is already talk of the need for bridges to be regulated; how that project pans out could influence the price of coins themselves. Until there is further clarity or significant security upgrades, crypto investors are left to ponder if a step across a bridge is worth the risk.
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