At which point will enough be enough?
At this point, you really gotta wonder whether investing in cryptocurrencies is even worth it.
This feels like one of the more obvious takeaways after the latest high profile crypto exchange hack, this time at Crypto.com, which just admitted overnight that it lost the equivalent of about $30 million in Bitcoin and Ether. It also says users have already been reimbursed for any losses.
Until very recently, it seemed like crypto really had a fighting chance of legitimately competing with, if not outright replacing, fiat currency. That optimism now feels like a fever dream, with new hacks dropping like flies and countless investors getting ripped off for doing little more than being in the wrong place at the wrong time.
In 2021, CNBC reports, crypto crime losses were up 79 percent and hackers stole a record-breaking total of $14 billion last year alone. According to the analytics firm Chainalysis, a significant factor driving all that grift is the rise of decentralized finance (DeFi) platforms, which grew an exponential 912 percent in 2021.
Crypto.com, of course, is a DeFi platform — one so ridiculously hyped up that it bought the rights to rename Los Angeles’ famed Staples Center to “The Crypto.com Arena” and paid Matt freakin’ Damon to film a splashy advertisement.
In rushing to replicate traditional banking as a means of legitimizing — and capitalizing upon — crypto the developers of these platforms have left their code open to hackers. And users who are more interested in the hype and promise of huge gains don’t much seem to care, Chainalysis noted in its annual crypto crime report. Indeed, 21 percent of last year’s hacks exploited these backdoors, a spokesperson for the firm told CNBC.
Basically, the goal of DeFi is to replicate brokerages and securities exchanges — except that sloppy security on platforms that embrace it have enabled hack after hack that drain investors’ money straight from the source.
The Crypto.com hack, which isn’t even the biggest in recent months, won’t convince DeFi hype-believers to divest from these insecure platforms. But at some point, these platforms are going to have to get their act together or risk the tide turning against them for good.
Updated to reflect that Crypto.com says it will cover users’ losses.
READ MORE: Crypto.com admits over $30 million stolen by hackers [The Verge]