The cryptocurrency space has experienced massive growth since the start of the year. However, as the adoption and market cap are growing, so is the number of thefts and scams in the cryptocurrency sector.
Crypto Scam Revenue Rose by 81%
A recent report by Chainalysis has revealed that revenue generated from cryptocurrency scams increased by 81% in 2021. The Crypto Crime Report showed that as the revenue increased, so also the amount stolen from investors.
Per the report, cryptocurrency hackers and scammers generated $7.7 billion since the start of the year, representing an 81% increase from 2020. The DeFi space is one of the fastest-growing in the cryptocurrency market. Hence, it wasn’t a surprise when DeFi rug pulls led the scam chart.
DeFi rug pulls took center stage, accounting for more than 87% of the total revenue generated from scams so far this year. This means that rug pulls generated $2.8 billion for scammers in 2021.
The report said, “Rug pulls are most commonly seen in DeFi. More specifically, most rug pulls entail developers creating new tokens and promoting them to investors, who trade for the new token in the hopes the token will rise in value, which also provides liquidity to the project — that’s how most DeFi projects start. In rug pulls, however, the developers eventually drain the funds from the liquidity pool, sending the token’s value to zero, and disappear.”
Furthermore, Chainalysis said rug pulls are popular within the DeFi space because it is cheap and easy to create new tokens on the Ethereum blockchain or others and get them listed on decentralized exchanges (DEXes) without a code audit.
Furthermore, the rug pulls bank on the greed of many investors who wish to make huge money from trading tokens with little to no utility.
Investors Need to do More Research
As the cryptocurrency space is growing, more bad actors will target cryptocurrency investors. This is why investors need to do more research about cryptocurrency projects before investing in them. This will ensure that they don’t invest in scam projects.
Furthermore, investors need to also increase the security of their cryptocurrencies by using hardware wallets and other types of secure wallets. Also, investors should take note of phishing links to avoid losing their wallet keys and other crucial information to hackers.
The number of deposits to investment scam addresses dropped from 10.7 million in 2020 to 4.1 million in 2021. This indicates that were fewer individuals fell victims to scams. However, it also showed that the amount taken from each victim went up this year.