Crypto investors have been hit hard by hacks and scams this year. One reason is that cybercriminals have found a particularly convenient way to get to them: crypto bridges.
Bridges, which connect networks to speed up the exchange of tokens, are gaining popularity as a way to transact between blockchains. Using them, users 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 as a result of bridge breaches. The amount stolen in bridge robberies accounts for 69% of all funds stolen as a result of cryptocurrency crimes in 2022.
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The biggest event was the theft of $615 million from Ronin, the bridge that powers 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 for others, the investor deposits the tokens in a smart contract, a piece of code on the blockchain that allows agreements to be executed automatically without human intervention.
The cryptocurrency is then created on the intermediate blockchain as 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?
This is largely due to the 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. The hackers only needed to compromise two of the five accounts in order to obtain the passwords needed to withdraw funds.
A similar situation happened with Ronin. The hackers only had to convince five of the nine validators on the network to hand over their private keys in order 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 not enough assets on the bridge blockchain. They didn’t even need any programming skills, and the exploits they used led to imitators.
Why do people keep using crypto bridges?
Without bridges, tokens are simply locked in their blockchains. In the context of the rapid development of the cryptocurrency sphere, a quick exchange between different encryption chains is vital.
At the same time, the bridges are practically uncontrollable and are not regulated in any way. The turnover of the “dirty” cryptocurrency, the owners of which are determined to avoid legal exchange channels, is in the billions of dollars . Currently, the crypto community and governments are faced with the question of starting to regulate the activities of crypto bridges, by analogy with the regulation of exchanges.
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Source: CNBC
