From 2010 onwards, Bitcoin gained traction as a medium of exchange on the dark web, in use across a cottage industry of marketplaces that were selling everything from narcotics to stolen goods, weapons and abusive material.
Into the Mainstream**
The affair captured the public imagination - in part due to events surrounding its closure, but also due to the unsuspecting nature of Ulbricht, a well-educated, 20-something operating everything from his laptop. Reporting focused heavily on Ulbricht, products available on Silk Road (which prohibited the sale of any items whose purpose was “to harm or defraud”, such as stolen credit cards, weapons, and child pornography), and the apparent bad actors operating on the site.
In February 2014 MtGox filed for bankruptcy in Japan, announcing that it had lost almost 850,000 Bitcoin (roughly 7% of total Bitcoin supply) through suspected theft. It remains one of the largest heists in the history of cryptocurrency at around $473 million, and has since been consistently reported on in the mainstream press.
**The succeeding years have seen many more hacks, some larger than MtGox. The largest 40 hacks since (and including) then have resulted in the theft of around $5 billion. A fifth of that amount is down to MtGox and CoinCheck, which lost $534 million in NEM tokens in 2018.
Operational security at these venues has improved dramatically; AML checks, cyber security, and blockchain analytics are embedded in most compliance procedures which have made largescale thefts much harder to execute.
In the first few months of 2022 alone, three decentralised protocols - Wormhole, Ronin Network, and Beanstalk - were hacked resulting in the theft of more than $1 billion. All three were widely reported in the mainstream press; they have also featured in discussions on how to appropriately regulate DeFi.
**Crypto hacks get a lot of air-time. They make for interesting press coverage; to the outside world crypto still feels murky, complex, and fraught with risk. It is easy to create the perception of crypto as a hotbed of crime, even if statistics tell us this is not the case.
The total value of crypto hacks for 2021 stood at a touch over $3 billion, or around 0.4% of the market value. That is the same amount of theft that Walmart sees in a year, at 1% of its global revenue. So despite being twice as large as Walmart, the crypto sector experiences less than half the amount of theft. And that’s just a comparison to one supermarket chain!
Ultimately there is nothing about crypto which creates more theft. It is that crypto is struggling to shake off its legacy and challenge misplaced perceptions about the sector. Time will tell how well it succeeds.
Meanwhile Walmart is quietly dealing with a crime spree bigger than that faced by the entire cryptocurrency sector. Now there’s a story for you…