Stealing crypto is easy, security experts say, but spending it is so hard that some hackers prefer to just hold the loot ransom

If you’re particularly bad, you’re proud of yourself, thinking you’ve gotten away with a big payday. But now you have to figure out how to cash out the crypto without getting caught.

Despite what you may think, it’s not so simple. 

“The skill set required for the initial exploit and subsequent laundering are very different,” Arda Akartuna, a cryptocurrency threat analyst at blockchain analytics and compliance firm Elliptic, told Fortune. 

The blockchain ecosystem just isn’t designed for processing large volumes of money anonymously. The options for laundering stolen crypto are limited, especially if massive sums are involved. For example, in the recent hack of the network underpinning the popular play-to-earn, blockchain-based game Axie Infinity, Akartuna predicted that the hacker “will face practical and logistical difficulties if they try to cash out the entire $600 million” stolen. 

“Hacking is the easiest part,” Jonah Michaels, communications lead at Web3 bug bounty platform Immunefi, told Fortune. “The hardest part is planning enough in advance to make sure that cashing out the funds is successful. Moreover, the larger the hack, the more unlikely it is that hackers will be able to make off with all the funds.”

“Tornado Cash is the typical first destination”

After a hacking, thieves usually (and obviously) want to launder the cryptocurrency they snagged without authorities tracing it back to them. 

However, each movement of cryptocurrency and transactions is documented on the blockchain, a public digital ledger. Though addresses, or the random string of letters and numbers that represent cryptocurrency wallets, are seemingly anonymous, they can be often traced to individuals.

To hide their trail, cyber thieves often use “mixers,” which let anyone deposit cryptocurrency and “mix” it with other people’s cryptocurrency. Users can later withdraw the same amount they put in, but it’s not the same cryptocurrency. 

Tornado Cash, one of the most popular cryptocurrency mixers, breaks the on-chain link between the deposit and withdrawal to “improve transaction privacy,” according to its website. It allows a different address to withdraw.

“Tornado Cash is the typical first destination that we see after exploits, small or large,” Akartuna said. Overall, mixers are “perhaps the most common” post-exploit blockchain activity by hackers, he added.

Indeed, as Michaels said, “Almost all hacks involve mixers like Tornado Cash, since after a hack, everyone is watching that hacker’s wallet address like a hawk.” Much can be learned from examining a wallet because it can give clues to hackers’ identities, such as previous transactions or whether they have other wallets that they’ve sent funds to.

“Without mixing, it’s too easy to follow the trail, and no matter how much time passes, all of that information is still publicly viewable on-chain,” Michaels said. “Even years later, people can set alerts to ping them of any movement of those funds.”

The Axie Infinity network hacker actually sent millions of dollars’ worth of the stolen cryptocurrency to Tornado Cash, as CoinDesk reported. 

But mixers aren’t foolproof. While mixers assist in obscuring the trail of funds, “there is still potential to trace through them, particularly if the funds being mixed are substantial,” Akartuna said. 

“The significant volume of funds being mixed will still be noticeable in comparison to the typically much smaller transactions that mixers handle day to day,” he added.

Firms like Chainalysis, which provide blockchain data and analysis to governments, are developing custom de-anonymization technology as well, Michaels points out.

Mixers, DEXs, and bridges

Along with mixers, hackers also convert stolen cryptocurrency to other crypto assets through decentralized exchanges (DEXs) or bridges. DEXs are peer-to-peer, blockchain-based cryptocurrency marketplaces that lack intermediaries and often self-execute trades using smart contracts, or collections of code that run on the blockchain. No personal information is necessary to use most DEXs.

In comparison, centralized exchanges (CEXs) like Coinbase and Gemini are platforms that facilitate the buying and selling of cryptocurrencies. CEXs must adhere to regulations that require them to know the identities of their customers, which isn’t ideal for people trying to hide what they’re doing.

The hacker behind the $600 million attack related to Axie Infinity actually made a potentially significant mistake: The person deposited thousands of Ether to CEXs, including Huobi, FTX, and Crypto.com, as CoinDesk reported.

“This is very much an unusual move,” Akartuna said.

Bridges let users move cryptocurrency from one blockchain to another. Usually, cryptocurrencies run on their own blockchains and are not compatible with that of others. To get around this, bridges can “wrap” cryptocurrency to create a derivative that represents a token from another blockchain. (Bridges are often also at the center of exploits, including some notable hacks.)

Regardless, it’s extremely hard to pull off. Breaking an on-chain link, effectively masking your identity as a hacker, and cashing out illicit funds is tricky. 

“You might expect an expert hacker wouldn’t make any mistakes on-chain that might reveal their identity, but intelligence to do the hack is not the same thing as conscientiousness to avoid making mistakes,” Michaels said. 

So, then what?

Cashing out stolen funds without a trace is such a hurdle that some hackers often return stolen funds “after negotiations with the exploited protocol,” Akartuna said. In one of the most massive exploits, a hacker in August stole $611 million from the decentralized finance (DeFi) protocol Poly Network but decided to return the funds soon after.

Some return the stolen funds to avoid prosecution and legal action. Others claim their plan was never to actually steal but to teach their victims a lesson.

For example, the Poly Network hacker claimed to have drained the funds “for fun.” In a message embedded in a transaction, the hacker said returning the stolen funds was “always [the] plan,” adding, “I am not very interested in money!”