In June 2022, Chainalysis will release its annual State of Web3 Report.  However, the blockchain data platform recently released a preview containing a teaser of some of the key findings of their 2022 report. Here are some of the main points uncovered in the upcoming report: 

Cryptocurrency Is Not Just For Criminals

In the early days of Bitcoin and cryptocurrency, one of the common criticisms was that only criminals would use the technology.  While this was not the case, some types of cybercrime, such as ransomware, relied on the technology, and criminals did take advantage of the perceived anonymity of cryptocurrency transfers.

Illicit usage of cryptocurrency has been declining for years, and the trend continues.  In 2021, only 0.15% of cryptocurrency transactions included illicit activity.

DeFi Protocols Are a Target and a Resource for Attackers

While illicit use of cryptocurrency in general is on the decline, DeFi-related illicit transactions are on the rise.  One of the biggest drivers of this is a rise in attacks against DeFi projects and protocols.

In 2019, most cryptocurrency thefts targeted centralized exchanges, but DeFi protocols were a growing target in 2020.  In 2021, the majority of thefts of cryptocurrency involved DeFi protocols, and the percentage has continued to grow to nearly 100% in the first two quarters of 2022.  Many of these attacks have been linked to groups associated with the North Korean government.

The other major contributor to illicit transaction volume on DeFi protocols is their use for money laundering.  In 2021, approximately 18% of laundered funds were sent to DeFi project’s addresses, growing to nearly 70% in 2022 YTD.

NFT Wash Trading Tactics Expand

Wash trading is a means of inflating the perceived value or liquidity of a token via fake sales.  The attacker transfers the token between two wallets that they control at an inflated price or simply to create the illusion of sales.

Normally, wash trading is designed to trick another party into buying an NFT at an inflated value.  

However, some NFT platforms give users reward tokens for transacting with NFTs.  Wash traders have begun taking advantage of this to earn rewards on fake transfers, which can be staked or sold to make a profit.

To read Chainalysis’ full report when it comes out in June 2022, you can sign up here to reserve your copy.

The Chainalysis State of Web3 in 2022 Report (Sneak Peek)
Rob Behnke
05.20.2022