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According to a recent report, cross-chain bridge attacks were responsible for 69 percent of all cryptocurrency losses in 2022, or $2 billion in damages.
The research, released on Tuesday by blockchain analytics company Chainalysis, notes that 13 different token bridge breaches have occurred this year, with the most recent being the $190 million Nomad Bridge flaw.
Due mostly to the Ronin Bridge Attack in late March, which resulted in the theft of $624 million in Ether (ETH) and USD Coin (USDC), Q1 2022 witnessed by far the largest crypto stolen since 2021.
Following last night's exploit of the Nomad Bridge, an estimated $2B has been stolen from cross-chain bridges so far in 2022. Read our blog to learn what makes these protocols vulnerable and what the industry can do about it. https://t.co/WLo62H6NFe pic.twitter.com/CZRnqrPikh
— Chainalysis (@chainalysis) August 2, 2022
Blockchain bridges, often referred to as cross-chain bridges, are used to move bitcoins between blockchain networks.
Even though bridge designs differ, users often deposit their tokens from one chain to the bridge protocol, which are then locked into a contract, according to Chainalysis. The user is then given what would be considered a parallel token in a different chain.
Weaknesses in bridges
Bridges are frequently targeted because they "include a central storage location of money that support the 'bridged' assets on the receiving blockchain:" claims the Chainalysis research.
"That storage site becomes a target, regardless of how those monies are stored—locked up in a smart contract or with a centralized custodian."
Effective bridge design is still in its early phases of development, according to some experts, and some developers still have a limited understanding of security protocols, leaving their protocols open to hacker exploitation.
James Prestwich, the inventor of Nomad, claims it will be "at least another year or two before there is enough familiarity across chain security models to establish countermeasures as a standard" in a video released on Twitter on July 22. This was almost two weeks before to the latest incident.
"In cross-chain systems, we haven't yet developed that kind of expertise on assaults; individuals don't know what the typical attacks are, therefore they don't fight against them."
Centralized exchanges were formerly a favored target of hackers, but according to Chainalysis, a decline in successful cyberattacks has been caused by improvements in security protocols.
The blockchain analytics company has emphasized that bitcoin services, such as bridges, should begin spending money on security improvements and training as soon as possible:
"Extremely thorough code audits might become the gold standard of DeFi, serving as a useful initial step in fixing problems like these for both the building protocols and the investors assessing them. The most reliable smart contracts will eventually be able to be used as building blocks by developers.
