CB Insights: VCs invested $257M in crypto auditing and security companies in 2022 so far, up from $185M across 2021, following high-profile Bridge hacks
At a time when many crypto companies have seen their fortunes plummet, one corner of the industry is thriving. Tweets: @annairrera , @annairrera , and @profess0rp Tweets: Anna Irrera / @annairrera : How much is business booming?📈 So far this year, 1,161 external projects have asked @ConsenSys to audit their smart-contract code, close to the # for all of 2021 and up from 247 requests in 2020. Clients can wait in line for audits costing up to $320,000 for as long as 9 months Anna Irrera / @annairrera : At a time when many crypto companies have seen their fortunes plummet, one corner of the industry is thriving. Firms that sift through code for weaknesses and run bug-hunting 🪲 sites are seeing business boom w/@olgakharif https://www.bloomberg.com/... Doc Brown / @profess0rp : In the California gold rush of the 1800's it wasn't the miners and prospectors who got rich: it was the shop keepers and tool suppliers https://twitter.com/...
Context & Ripple Effects
Security was already crypto's fastest-growing funding category before this year: VCs put over $1B into cryptosecurity in 2021 alone, a 10x jump, after more than 20 hacks of $10M or more made audits a board-level concern. What the CB Insights numbers add is the counter-cyclical twist — $257M flowing into auditing and security so far in 2022 against $185M in all of 2021, even as the article notes crypto companies' fortunes broadly plummeting.
The demand side confirms it isn't just investor sentiment: ConsenSys has fielded 1,161 external smart-contract audit requests in 2022, nearly matching its full-2021 total and up from 247 in 2020, with clients paying as much as $320,000 and waiting up to nine months. The bridge hacks are the proximate driver — cross-chain bridges concentrate value in single contracts, making their code the highest-stakes audit target.
First-order effects
- ConsenSys and rival auditors now hold the pricing power: with multi-month queues at fees up to $320,000 per engagement, they can ration capacity to the largest clients while smaller projects either wait or launch unverified.
- Security and auditing startups are raising on favorable terms — $257M in VC money so far in 2022 versus $185M across 2021 — while most other crypto categories face retreating investors.
Second-order effects
- Projects competing for scarce audit slots will bid up prices further or ship unaudited bridge and DeFi code, which raises the probability of exactly the exploits driving the demand — a self-reinforcing loop for the auditors.
- The 2021 pattern of $1B+ annual VC investment in cryptosecurity looks set to consolidate around fewer, larger audit firms, squeezing out boutique reviewers who can't staff nine-month backlogs.
Third-order effects
- If hack losses keep scaling with market size — Chainalysis later tallied $1.58B stolen in the first seven months of 2024, up ~84% YoY — third-party verification hardens into a permanent compliance-style layer of the industry, priced independently of token cycles.
- Institutional counterparties and insurers increasingly treat an audit queue position as a gating requirement for listing or underwriting, shifting industry structure toward whoever controls the verification bottleneck.
The trend: Crypto security and auditing is emerging as a counter-cyclical industry whose revenue scales with hack losses rather than asset prices, turning code verification into structural infrastructure.