As decentralized finance (DeFi) and the wider Web3 landscape rapidly evolves, security remains a paramount concern in the crypto space. With new threats constantly emerging, understanding attack patterns is critical to assessing risk and ensuring reliability. In 2023, over $990 million was lost or stolen in cryptocurrencies, according to Cointelegraph’s Crypto Hacks database.
This increased demand for security has given rise to a diverse ecosystem of Web3 security experts, including decentralized identity solutions, smart contract auditors, and others dedicated to protecting this dynamic digital realm.
The Lazarus Group, a state hacking organization from North Korea, remains a persistent threat. In 2023, this group was responsible for confirmed losses exceeding $291 million. Even as the year rolled into the third quarter, Lazarus continued its activities and launched an attack on CoinEx that resulted in over $55 million in losses, underscoring the ongoing challenges in cyber security.
Enhancing cryptocurrency security with blockchain analytics
Even cryptocurrency companies can sometimes struggle to fend off potential hacks and exploits. As a result, individual cryptocurrency enthusiasts need skills to perform analysis and research to protect funds. Blockchain analysis is an investigative process involving the examination of blockchain transactions in order to trace illegal activities and recover stolen assets. It works like this:
Transaction Tracking: Blockchain analysts closely monitor blockchain transactions related to the stolen cryptocurrency.
Address clustering: Analysts group together related addresses to discern the flow of stolen funds, facilitating a better understanding of how funds move between wallets.
Behavioral analysis: Analysts identify unusual or suspicious behavior that suggests hacking or theft by examining transaction patterns.
Pattern recognition: Analysts use historical data and known attack patterns to recognize emerging threats, enabling early detection and mitigation.
Regulatory Vigilance: Governments around the world are enforcing stricter Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations in the crypto sector.
Collaboration: Blockchain analysis often requires collaboration with law enforcement, exchanges, and other stakeholders to freeze or recover stolen assets.
When investigating a cryptocurrency hack, blockchain analysis is one of the investigator’s essential tools. Another critical component is open-source intelligence (OSINT). OSINT is used to gather information about individuals or entities involved in hacking, often involving tools such as Etherscan, Nansen, Tenderly, Ethective or Breadcrumbs to gain a deeper understanding of the situation.
By combining blockchain analytics with OSINT, investigators can build a comprehensive picture of the hack, potentially identify the perpetrators and recover stolen assets more effectively.
