2022 was one of the worst years in recent memory for the crypto space. While there were many positive developments, there were also huge losses, hacks, and scams.
DappRadar’s recent report explored some significant crypto market events, and security issues that rocked the markets in Dapp world 2022. Before looking into the worst parts, let’s highlight some of the positive developments in 2022.
Crypto positives in 2022
The blockchain space passed several milestones crossed in 2022. Some of them include technical and simple regulatory upgrades. The milestones achieved in 2022 include the following;
The full implementation and merge of the ethereum PoS network in September
The implementation of the Cardano Vasil upgrade
The creation of a new regulatory framework for cryptos in 2022
The registration of a multiple cryptocurrency exchange network
Crypto clouded by attacks
The DappRadar report explored the performance of Dapps and blockchains hosting them throughout the year. However, their primary area of focus remained the hacks and vulnerabilities suffered by different Dapps.
The hacks and attacks have been explored within the industry to learn from the vulnerabilities. The DappRadar report stated that there were numerous attacks associated with crypto networks in 2022, hitting about 312 in total.
The data from DappRadar indicated that the losses recorded throughout the year hit about $48 billion. However, while the amounts recorded were insanely high, according to their analytics, most of the losses were driven by a small number of attacks.
The report demonstrates that most funds were lost not via decentralized platforms, but actually on centralized platforms, like LUNA.
Excluding Terra, scam volumes were low
According to reports, scams in 2022 besides Terra generated relatively low losses. In fact, according to analysis, the total volume of scams was way lower than Terra’s.
DappRadar’s analytical charts indicate that between January and April, the funds lost in the Dapp landscape were around $1 billion. The number of scams per month in the four months ranged between 9 and 25.
Total losses per month without Terra. Source: DappRadar
After the collapse of Terra in May, the market conditions became harsher, and there have been several substantial scams and crashes since then. In June, losses of $2 billion were recorded. Later, in October, losses amounted to $1 billion.
Total losses per month. Source: DappRadar
As the year was nearly closed, in early November, more big crypto scams occurred, with losses amounting to $4 billion. Throughout this year, there was an average of 25 hacks and scams every month. The average monthly losses, according to analysis, were $345 million.
Centralized networks recorded more losses
The DappRadar report also noted that most of the attacks that occurred within the year were on centralized networks. Centralized platforms like LUNA and other crypto exchanges suffered the most damaging attacks, totaling $44 billion in the year.
Further, the report dug deep into the specifics of the blockchains involved.
The report noted that, on average, the amounts stolen per hack on the ethereum blockchain were 30% higher than the BNB chain. However, while the amount per hack was higher on the ethereum blockchain than BNB chain, the total values indicate that more ($1.578 billion) was stolen from the BNB Chain than from ethereum ($1.02 billion).
Rug pulls remained prevalent
According to the report, there were about 119 incidents associated with cryptocurrency rug pulls. Interestingly, the amount stolen was close to $200 million, indicating an average of $1.6 million lost per rug pull.
Access control breaches
The next most common hack was an access control breach, with 30 incidents throughout the year, and a total loss of $1.02 billion. An access control breach is simply unauthorized access to a blockchain network.
Flash loan attacks
DappRadar also reported numerous flash loan attacks throughout the year, with about 20 incidents costing the industry about $240 million in losses. There were 20 exit scams reported, a popular kind of rug pull, with $50 million recorded as losses.
Normal exploit hacks, phishing, and Oracle incidents
There were around nine phishing attacks which only cost the industry about $0.01 billion. Around seven oracle incident reports also recorded $0.05 billion as losses. Ordinary exploit hacks hit a high at 19 incidents in the year, creating $220 million in losses throughout this year.
The DappRadar charts give a full view of the attacks throughout the year. As seen, Rug Pulls were the most, but the value garnered is relatively lower compared to other lost funds models.
Highlighting the top crypto scam noted by DappRadar
Top ten crypto scams in 2022. Source: Dappradar The Terra Luna saga
The largest and most costly attack in the crypto ecosystem in 2022 was Terra Luna‘s fall. According to the data, the fall of the Terra Luna network led to losses amounting to about $40 billion in a couple of days. Nothing that occurred in 2022 can even remotely compare to the losses suffered after the Terra implosion.
The timeline of events before and after the Terra fall is astonishing. All the trouble began in early May when the UST stablecoin, Terra network’s native stablecoin, lost its $1 peg. For clarity purposes, the value of 1UST was the same as that of $1. Therefore, this stablecoin could be used as a direct replacement for the dollar in online markets.
However, based on reports, the UST peg plunged to as low as $0.3, $0.7 off its $1 dollar peg in merely a few hours. Due to the de-pegging, LUNA, UST’s backing coin, immediately lost value. In simply a few hours, LUNA plunged from $87 to less than a dollar. In fact, by May 13th, LUNA’s price had declined to just about $0.0012. A $40 billion network dropped below $1 million in only a few days.
LUNC Price. Source Coingecko.com
Reports indicate the possibility of foul play from other investors, including market manipulation. However, nothing conclusive has been shown that would prove wrongdoing.
The Terra Luna fall led to massive losses amounting to $40 billion in just two crypto tokens. However, reports indicate several small rug pulls and exploits during the year. Dapp Radar reported that only this single fall was larger than the combination of all DeFi scams recorded in 2022.
Genesis’ fall
The fall of the Genesis network is considered the second-largest scam of the year 2022, according to a report by DappRadar. Genesis’s fall led to a massive loss of around $2.8 billion.
While the platform’s problems began months ago, it made its final bow sometime in November. In fact, towards the end of November and early December, Genesis maintained that getting a $1 billion loan would help keep them afloat.
However, before all these problems, Genesis was already in a deal to be salvaged by FTX. Furthermore, the lender had $175 million held in an FTX account, hence was forced to stop any further withdrawals because of the preexisting market conditions.
Celsius Network implodes
Another network’s death occurred in June this year and was the popular lender Celsius. At its death, Celsius recorded losses amounting to $1.2 billion on June.13. This borrowing and earning platform filed for chapter 11 bankruptcy, listing a deficit amounting to $1.18 billion on its financial statements.
With liabilities hitting $5.5 billion, Celsius had assets amounting to $4.3 billion.
The bankruptcy proceedings continue today, and Celsius is still amassing large volumes of expenses despite publicly declaring a lack of operational funds. The fall of the Celsius network is the third-largest crypto network failure recorded in 2022.
FTX falls apart
A couple of weeks ago, FTX, one of the three largest crypto exchanges globally, suffered one of the industry’s most widely noticed failures. The exchange fell from glory, was almost saved by Binance, but ended up filing for bankruptcy.
FTX group was a collection of many crypto-focused brands, and had connections with most of the major crypto exchanges.
Investigations into this fall have led to more questions than answers, especially concerning the dead exchange’s financial dealings. The most recent reports suggest that the exchange service provider made fraudulent transactions, and funded purchases of top networks using its self-created token FTT.
Bitcoin Sheikh
Bitcoin Sheikh is a name given to Ponzi Scheme runner Francisco Valdevino da Silva who stole about $766 million from investors, promising them high returns. According to the reports, many celebrities and footballers were among the biggest losers from the scheme. This scam is undoubtedly one of the biggest of the year.
Axie Infinity’s Ronin bridge exploit
The Ronin exploit associated with Axie infinity was among the biggest problems in the Dapp world in 2022. Axie Infinity created the Ronin Bridge to keep transaction fees lower. However, the Ronin Bridge opened an unforeseen vulnerability which led to a massive hack. The hack stole $578 million (173.6k ETH). Later, it was discovered that the Lazarus hack group was involved in the attack.
BNB Chain got rekt
A couple of weeks ago, in mid-October, the BNB chain was hit by a massive hack that led to a loss of about 2 million BNB tokens valued at $586 million. While the attacker manipulated and could have gone away with $586 million, reports note that validators halted the network. As such, the attacker only stole $150 million.
Other issues in the Chainalysis report
Ethereum remained the dominant protocol in 2022
According to the DappRadar report, ethereum remained the most dominant decentralized applications host in 2022. Ethereum is the second largest blockchain ecosystem after Bitcoin and the most prominent host for smart contracts.
Statistical analysis indicates that despite the massive problems noticed in the crypto landscape, ethereum maintained its superiority over every other decentralized applications host. According to the report, ethereum’s TVL for DeFi protocols was $32.12 billion, with other platforms indicating the TVL is about $39.65 billion.
Ethereum’s domination stems from the fact that this is simply the blockchain focused on hosting decentralized applications. However, several other networks grew in numbers in 2022, some amassing a strong market share.
While Ethereum’s dominance is almost 100% asserted, the DappRadar report indicates that the dominance plunged by 74.56% from 2021’s values. Reports indicate that Binance Smart Chain reclaimed its position as the second largest DeFi host, recording a 62.5% decrease and hitting $6.5 billion.
Gaming, Gambling, and DeFi were the most popular Dapp categories
The report also explored the different subcategories of decentralized applications and how they performed in 2022. According to DappRadar, the Dapps can be sub-categorized into DeFi, Games, and Gambling.
DappRadar’s analytics indicate that in 2022, Gaming decentralized applications towered over other market competitors throughout the year. So, according to DappRadar, the gaming Dapps maintained dominance as the most prevalent category. For instance, DappRadar’s charts suggest that the game Dapps averaged 622,620 dUAW, surging by 85% in 2022 to hit 1,152,255 dUAW.
The charts also suggest that DeFi Dapps recorded a slight increase in Unique active wallets by 2% to 652 thousand wallets in 2022.
Another one of the biggest gainers in the year was gambling Dapps, which recorded a 100% surge in UAW to just about 110k from 53k. This indicates that the gambling world grew two folds within the blockchain space.
Other subcategories also grew lightly in the year, with NFTs recording 33% more UAW to 178k in 2022. Interestingly, DappRadar’s charts suggest that the high-risk category of decentralized applications recorded a 291% surge in UAW from 2021 to 2022. In the period, high-risk Dapps recorded 145k wallets.
Final word
This guide explored the insecurity issues highlighted by DappRadar, which affected crypto networks and investors in 2022. The problems led to colossal losses, with the total amount lost hitting $48 billion.
The DappRadar report also indicates the insecurity and uncertainty problem that still resides in the cryptocurrency landscape. However, investors are still losing from network mismanagements, hacking, and more.