AI-Powered Crypto Crime: A New Frontier for Blockchain

Chainalysis predicts that in the near future, artificial intelligence may give rise to a worrisome type of crime involving cryptography.

AI Could Boost Crypto Crime Chainalysis

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Artificial intelligence (AI) has taken the world by storm, revolutionizing industries and transforming the way we live and work. However, according to blockchain intelligence platform Chainalysis, AI could bring about a dangerous new type of crypto-based crime in the coming years. In a private video webinar, Chainalysis Cybercrimes Research Lead Eric Jardine discussed the growing trend of illicit blockchain activity in 2023 and predicted the tactics that criminals may adopt next.

The Impact of AI on Blockchain Crime

Jardine highlighted the potential impact of rising technologies, particularly large language models (LLMs), on blockchain crime. He noted that AI models could be used for code audits to enhance the security of decentralized finance (DeFi). On the flip side, these same models could be exploited by illicit actors to identify vulnerabilities in smart contracts.

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The DeFi sector is a prime target for cryptocurrency theft, with hackers exploiting code flaws, obtaining private keys, and manipulating prices to steal assets. While formal audits have become an industry standard, their success in preventing hacks is not foolproof. The introduction of AI introduces a new level of uncertainty. It remains unclear whether AI will strengthen smart contracts or aid attackers, as its benefits may fluctuate over time.

Despite this, there has been a decline in the overall volume of stolen DeFi funds, dropping from $3.1 billion in 2022 to $1.1 billion in 2023. The number of incidents also decreased from 273 to 172. However, AI-powered crime is not limited to DeFi.

AI and Romance Scams

AI could have worrying implications for romance scams, commonly known as “pig butchering” scams. These scams start with seemingly innocent contact and develop into a fabricated relationship, which the scammer then exploits for financial gain. Jardine emphasized that large language models, with their infinite patience and creativity, could be used by criminals to devastating effect in this context.

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Despite a decline in total scam volume from $6.5 billion to $4.6 billion, romance scammers in the crypto space nearly doubled their revenue in 2023 compared to 2022. The average size of a romance payment is $4,593, and victims often end up paying far more due to multiple payments involved in these scams.

While the share of illicit activity in all crypto transactions fell to just 0.34% in 2023, the rise of AI-powered crime in romance scams is concerning.

Q&A: Answers to Your Burning Questions

Q: How can AI be used to improve the security of DeFi?

A: AI models can be employed for code audits to identify vulnerabilities in the DeFi ecosystem, ultimately strengthening its security against potential attacks.

Q: Are formal audits effective in preventing hacks in the blockchain industry?

A: Formal audits have become an industry standard in the blockchain space. However, their success rate in preventing hacks is not guaranteed. The introduction of AI adds an element of uncertainty to security measures.

Q: How can AI be used in romance scams?

A: Large language models powered by AI can be exploited by criminals for romance scams. Their infinite patience and creativity make them potent tools in manipulating victims and extracting financial gain.

The Future of AI and Crypto Crime

As we navigate the intersection of AI and blockchain, it is essential to stay vigilant and adapt our security measures to mitigate the risks associated with AI-powered crime. While the exact future remains uncertain, it is crucial for individuals and organizations to prioritize cybersecurity and regularly update their defenses against evolving threats.

The decline in the volume of stolen DeFi funds and the decrease in scam volume indicate progress in combatting illicit activities. However, with the rise of AI-powered threats, new strategies and technologies must be developed to stay one step ahead of criminals.

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  2. Illicit Blockchain Activity in 2023
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Disclaimer: The information provided in this article is for informational purposes only and should not be taken as investment advice. Always do your own research before making any investment decisions.

Article contributed by Andrew Throuvalas. Last updated: March 15, 2024 17:28 EDT.

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