Over $10 Billion Has Been Lost To DeFi Exploits In 2021
November 20 2021 - 2:00PM
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Decentralized finance (DeFi) platforms have been the target of
criminal attacks this year. Investors in the blockchain-based form
of finance have lost billions of dollars to criminals that
target the platforms. The total amount of money deposited at DeFi
services has spiked from just $500 million in 2019 to $247 billion
this year. Related Reading | Dog-Themed DeFi Project
Mysteriously Loses Fundraised $60 Million According to
a report from London-based firm Elliptic, the overall losses
caused by DeFi exploits have totaled $12 billion in the past year.
Out of that amount, fraud and theft accounted for $10.5 billion,
seven times the amount last year. DeFi, which has drawn in billions
of dollars in investor funds, has also been a frequent target by
hackers. They exploit poorly protected protocols, mostly using
flash loans. Related Reading | Poly Network Confirms Hacker
Has Returned Most Of The Stolen Crypto One of the popular attacks
this year was the Poly Network hack. Hackers exploited a
vulnerability in the multi-chain interoperability protocol. And
they took off with roughly $600 million worth of various
cryptocurrencies. They however returned most of the stolen funds.
DeFi – The Wild West Of Cryptocurrencies Elliptic is a firm that
tracks movements of funds on the digital ledgers that underpin
cryptocurrencies. It recently reported that DeFi exploits amounted
to $12 billion this year. DeFi is often called the “Wild West” of
cryptocurrencies because it is still the most unregulated area of
crypto. DeFi platforms allow users to lend, borrow and save –
usually in cryptocurrencies – without any involvement from
middlemen like banks. “The DeFi ecosystem is an incredibly exciting
and fast-moving space, with financial services innovation happening
at light speed,” said Tom Robinson, chief scientist at Elliptic.
“This is attracting large amounts of capital to projects that are
not always robust or well-tested. Criminal actors have seen the
opportunity to exploit this.” According to the report, the
underlying technology of DeFi is built on open infrastructure.
However, that technology is “relatively immature and untested.”
There are bugs in code as well as design flaws that enable
criminals to target the platforms. DeFi market cap at $165.47B |
Source: Crypto Total DeFi Market Cap on TradingView.com
“Decentralized apps are designed to be trustless in that they
eliminate any third-party control of users’ funds,” said Robinson.
“But you must still trust that the creators of the protocol have
not made a coding or design mistake that could lead to a loss of
funds.” Criminals can also easily launder proceeds of crime while
leaving few traces. “The irreversible nature of crypto transactions
make it very challenging to recover these funds,” says the report.
Call For Regulation With the alarming number of exploits the space
is facing, there are calls for DeFi regulation. Regulators are now
also turning attention to the sector. However, the actions of
regulators in the coming months will play a significant role in
determining how well they thrive in the future. Featured image by
Aergo, Chart from TradingView.com
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