Decentralized Finance, or DeFi, refers to a system where financial products are made available on a public decentralized blockchain network. In 2021, DeFi has been a thriving sector, with talks of it replacing traditional finance by 2030.
As the DeFi sector grows, cybercriminals continue to invent new ways of tricking investors of their funds. According to the blockchain analysis provider, Elliptic, over $10.5 billion of user funds has been stolen through DeFi fraud and theft in 2021.
DeFi Losses At an All-Time High
According to Elliptic, the total amount lost to DeFi exploits in 2021 has exceeded $12 billion.
According to the report, fraud and theft account for $10.5 billion. Thus, the amount lost in DeFi protocols in 2021 is already more than 7x the entire amount lost in 2020.
The London-based blockchain analytics firm explained that the large amounts raised by defi projects have attracted a lot of scammers and hackers who exploit bugs in the code and design flaws to siphon millions of investors’ funds.
The most notable exploits in 2021 include the $610 million Poly Network hack, PAID Network’s $180 million loss from an exploit, and the $130 million Cream Finance exploit.
There have also been several DeFi rug-pulls where scammers convince investors to buy their tokens. Then, after raising funds, the scammers disappear with the funds, leaving investors with valueless tokens.
On The Flipside
- Regardless of being called the “Wild West” of crypto, DeFi protocols continue to grow, with the total value locked in the sector now at $258 billion.
Why You Should Care?
Although DeFi has been hinted to be the successor to traditional finance, DeFi protocols need to improve security for greater trust and adoption.
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