- According to Chainalysis, crypto fraudsters made a near-record $7.7 billion in revenue in 2021.
- A relatively new scam known as “rug pulls” was responsible for the 81% increase in earnings.
- When developers abruptly depart their cryptocurrency projects and take their users’ funds with them, this is known as a rug pull.
The blockchain data platform said Thursday in a blog post that will be part of its broader Crypto Crime report coming in 2022 that revenue from frauds increased by 81% from a year ago to $7.7 billion in bitcoin.
“As the most common form of cryptocurrency-based crime and one that is specifically aimed at new users, scamming is one of the most serious dangers to the continued adoption of cryptocurrencies,” according to Chainalysis.
The development of “rug plugs,” which leave investors in crypto-projects empty-handed, contributed to this year’s revenue growth.
As per Chainalysis, they’ve evolved into the “go-to” scam in the DeFi ecosystem. In these schemes, the creators of a cryptocurrency project — usually a new token — depart it unexpectedly and take the funds with them.
Rug pulls accounted for 37% of all bitcoin scam revenue this year, compared to 1% in 2020, and victims were left with $2.8 billion in cryptocurrency.
“Rug pulls are common in DeFi since it’s cheap and easy to produce new tokens on the Ethereum blockchain or others and get them listed on decentralised exchanges (DEXes) without a code audit with the correct technical know-how,” according to Chainalysis.
“While code audits to detect these vulnerabilities are widespread in the sector, they aren’t necessary to list on most DEXes, which is why we see so many rug pulls.”
According to the report, the largest rug pull of the year did not begin as a DeFi effort. Instead, according to the article, Thodex was a prominent Turkish centralised exchange whose CEO vanished shortly after the exchange banned user fund withdrawals.
This rug pull resulted in the loss of more than $2 billion in cryptocurrencies, accounting for roughly 90% of the total value stolen.
AnubisDAO, the second-largest rug pull of 2021, with more than $58 million in cryptocurrencies seized, is an excellent example of how DeFi rug pulls function.
AnubisDAO was founded on October 28, 2021, with the premise that it will provide decentralised, free-floating money backed by a basket of assets. AnubisDAO raised nearly $60 million from investors almost overnight with little more than a DOGE-inspired logo — the project had no website or white paper, and all of its developers used pseudonyms — all of whom received the project’s ANKH token in exchange for funding the project’s liquidity pool.
Mainstream cryptocurrency services, such as exchanges, are uniquely positioned to combat scams and build trust in bitcoin by warning users or even stopping them from completing transactions. In 2021, one well-known platform did just that, and the results were highly encouraging.