$2 billion in cryptocurrency stolen from cross-chain bridges so far this year

According to a new report, cross-chain bridge hacks account for 69% of all stolen cryptocurrencies in 2022, amounting to $2 billion in losses.

The report was published by blockchain analysis firm Chainalysis on Aug. 2, the report states. There have been 13 token bridge hacks this year, the most recent being the $190 million Nomad Bridge hack.

So far, the first quarter of 2022 is the quarter with the largest number of stolen cryptocurrencies since 2021, mainly due to the Ronin Bridge attack at the end of March, which resulted in the theft of $624 million in ETH and USDC.

An estimated $2 billion has been stolen from cross-chain bridges so far in 2022 following the Nomad Bridge attack. Read our blog post to learn what makes these protocols vulnerable and what the industry can do about it. https://t.co/WLo62H6NFepic.twitter.com/CZRnqrPikh
— Chainalysis (@chainalysis) August 2, 2022

Cross-chain bridges, also known as blockchain bridges, are designed to transfer cryptocurrencies from one blockchain network to another.

Chainalysis explained that while cross-chain bridge designs vary, users typically deposit their tokens from one chain into a cross-chain bridge protocol, which is then locked in a contract. The user then receives the equivalent of a parallel token on the other chain.

Cross-chain bridge vulnerability

According to the Chainalysis report, cross-chain bridges are often targeted because they "have a central point of storage of funds that supports receiving 'bridged' assets on the blockchain."

“Regardless of how those funds are stored — locked in a smart contract or hosted by a centralized custodian — that point of storage can be targeted.”

According to some experts, effective cross-chain bridge designs are still in the early stages of development, and some developers have relatively little knowledge of security protocols, making their protocols vulnerable to hackers.

In a video posted on Twitter on July 22, Nomad founder James Prestwich stated that "it will be at least a year or two before cross-chain security models become familiar enough to use defenses as a standards to be established.”

“In a cross-chain system, we haven’t built expertise on attacks, and people don’t know what the common attacks are, so they don’t defend against them.”

According to Chainalysis, centralized exchanges were once a favorite target of hackers, but with advances in security protocols, there have been fewer successful cyberattacks.

The blockchain analytics firm emphasized that cryptocurrency services, including cross-chain bridges, should start investing in security upgrades and training as early as possible.

“A valuable first step in addressing this type of problem could be making extremely rigorous code audits the gold standard in DeFi, both for those building protocols and the investors evaluating them. Over time , the strongest and most secure smart contracts can serve as templates for developers to build on.”