Businesses and individuals involved in the Web3 industry lost nearly $4 billion to fraud and cybercrime last year, a new report shows.
Web3 is the idea behind a possible next version of the internet, built on decentralized solutions, blockchain and token-based economy. It has gained prominence in recent years following the explosive growth of Bitcoin, Ethereum, and other blockchain solutions, although so far there has been little tangible returns.
As more organizations began building new systems, scammers quickly came out of the woodwork, and now Web3 bug bounty provider Immunefi has claimed that exactly $3,948,856,037 worth of cryptocurrencies broke through the Web3 ecosystem in 2022 Scams, hacks and scams have been lost.
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Most incidents occurred on the BNB chain (Binance chain – 65 incidents) and Ethereum (49).
The silver lining, the researchers say, is the fact that overall losses have fallen by more than half (51.2%) year over year. In 2021, the industry had lost $8,088,338,239.
However, the constant fight against scammers is not slowing down the growth of the industry. Immunefi expects it to grow from $3.2 billion last year to $81.5 billion over the next seven years, a CAGR increase of 43.7%.
“Web3 is still a brand new world of uncharted territory,” said Mitchell Amador, Founder and CEO of Immunefi. “By definition, this novelty brings a certain level of inexperience and danger to the game. Additionally, due to the nature of the Web3 ecosystem, where smart contract code holds vast amounts of capital, the environment is far more hostile compared to traditional Web2 applications.”
To safely navigate these uncharted waters, CISOs and other security leaders should invest in security training, recommends Amador. This education should go beyond that endpoint protection (opens in new tab)Phishing and social engineering, into things like cryptocurrency wallets, private keys, and popular DeFi (decentralized finance) applications.
Alex Mashinsky, former CEO of failed crypto lender Celsius, was recently indicted by the New York Attorney General on fraud charges in just one of many cases in which crypto firms have gone bust over the past year. In addition to Celsius, FTX, 3 Arrows Capital, BlockFi and many others have also been forced into bankruptcy proceedings over the past year.
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