Web3 fraud cost the sector billions of dollars last year

Last year, about 4 billion was stolen from businesses and individuals working in the Web3 industry, according to a new research.

As a potential successor to the current internet, Web3 is based on decentralised systems, blockchain technology, and tokenized economies. Following the meteoric emergence of Bitcoin, Ethereum, and other blockchain solutions, it has gained popularity in recent years, although offering few tangible benefits thus far.

As more businesses began using new systems, fraudsters emerged, and now a Web3 bug bounty provider named Immunefi claims that in 2022, the Web3 ecosystem lost a total of 3,948,856,037 worth of cryptocurrency due to fraud, hacks, and scams.

Strengthening Protections

The Binance Chain (BNB Chain) saw the most number of events(65), followed by Ethereum (49).

The good news, according to the study authors, is that annualised losses fell by more than half (51.2%). As of 2021, the sector has lost a total of 8,088,338,239.

Despite the ongoing fight against fraudsters, the business continues to expand. From 3.2 billion in 2016, according to Immunefi’s projections, the market is expected to expand to 81.5 billion by 2024, an annualised growth rate of 43.7%.

According to Immunefi co-founder and CEO Mitchell Amador, “Web3 is still a whole new universe, full with unexplored routes.” That’s never been done before, so there’s an element of inexperience and risk there. In addition, the environment is far more hostile compared to conventional Web2 apps because of the very structure of the Web3 ecosystem, in which smart contract code contains enormous sums of cash.

Amador advises CISOs and other security professionals to invest in security education in order to confidently traverse these unfamiliar seas. Cryptocurrency wallets, private keys, and widespread DeFi (Decentralized Finance) apps are all areas where education is needed beyond endpoint security, phishing, and social engineering.

In one of several examples of cryptocurrency companies falling under last year, former CEO of the defunct crypto lender Celsius Alex Mashinsky was recently charged with fraud by the New York Attorney General. Many companies, including Celsius, FTX, 3 Arrows Capital, and BlockFi, filed for bankruptcy last year.