“As the largest form of cryptocurrency-based crime and one uniquely targeted toward new users, scamming poses one of the biggest threats to cryptocurrency’s continued adoption,” Chainalysis said.
Venture capital funds have poured about $30 billion into crypto, or more than in all previous years combined for the little more than a decade-old technology.
That’s almost quadruple the previous high of around $8 billion in 2018, or the year following Bitcoin’s more than 1,300 per cent breakthrough gain, according to transaction data compiled by PitchBook Data.
“We’ve moved beyond just digital gold. We’ve got financial services, art, gaming as a subcategory of NFTs, Web 3.0, decentralised social media, play-to-earn — all of that made investors think ‘we don’t have enough exposure,’“ said Spencer Bogart, general partner at San Francisco-based Blockchain Capital, one the largest investors in the industry after financing more than 120 companies since its inception in 2013.
Meanwhile, according to Blockchain analysis firm Chainalysis,Cryptocurrency scammers netted $7.7 billion worth of cryptocurrency from victims in 2021, an 81 per cent rise in losses compared to last year.
The new report showed on Monday. nearly $1.1 billion of the $7.7 billion were attributed to a single scheme which allegedly targeted Russia and Ukraine.
A key source of rising cryptocurrency scams in 2021 were ‘rug pulls’, where the developers of a new cryptocurrency vanish and take supporters’ funds with them, reports ZDNet.
Rug pulls accounted for 37 per cent of all cryptocurrency scam revenue in 2021, at $2.8 billion.
“As the largest form of cryptocurrency-based crime and one uniquely targeted toward new users, scamming poses one of the biggest threats to cryptocurrency’s continued adoption,” Chainalysis said.
The report found that the number of active financial scams rose from 2,052 in 2020 to 3,300.
Scams also went up in line with the rise in value of popular cryptocurrencies such as Ethereum and Bitcoin.
“The most important takeaway is to avoid new tokens that haven’t undergone a code audit. Code audits are a process through which a third-party firm analyses the code of the smart contract behind a new token or other DeFi project,” said Chainalysis.