Chart of the Day: As crypto currencies plunge, crime doesn't pay anymore
June 27, 2022 / 08:27 AM IST
Crypto currencies have been having a meltdown in the past few months with the value of the most popular bitcoin on a free fall. This seems to have had an unexpected effect on thefts or hacks involving crypto currencies. Data from the Bank for International Settlement (BIS) shows that instances of theft dropped to 6 during the second quarter of this year from 16 instances in the first three months. To be sure, crypto thefts have grown sharply over the years, laying bare the vulnerabilities underlying the blockchain technology backing these currencies. The BIS, in its annual report, notes that crypto crimes have increased manifold in recent years which coincides with increased interoperability between blockchains. Interoperability refers here to the ability of protocols and validators to access and share information, as well as validate transactions, across different blockchains. Interoperability of the underlying settlement layers is not achievable in practice, as each blockchain is a separate record of settlements. But cross-chain bridges permit users to transfer coins across blockchains. The fragmentation of crypto currencies only heightens this vulnerability to theft. What’s more is that the user base for several crypto currencies overlap which causes similar price movements, the BIS noted. When the inflow of new users slows, the resulting drop in value could have a ripple effect across crypto currencies.