Robbery, rug pulling and fraud schemes.
The common denominator of all these operations is taking and stealing users’ money.
Last year 2020, the value of stolen funds was $1.5 billion.
This value will double frighteningly in 2021 and reach $ 10.5 billion, according to a new report issued by the risk management company “Elliptic”.
Decentralized finance, or DeFi, refers to blockchain-based applications that allow people to bypass banks and other traditional financial intermediaries to lend, borrow, save or trade with peers using automated smart contracts that are connected to each other.
The sector has more than $250 billion in digital assets flowing through its veins, according to data it compiled DeFi Llama.
As recently as June 2020, that number was less than $1 billion.
The increased use of protocols, as well as the rising prices of the underlying currencies and the governance tokens that support them, have created a virtuous cycle for those who have invested deeply in the space.
But the growing popularity, not to mention the expansion from Ethereum to networks like Solana and Binance, also means DeFi has more cash to steal, even as many projects struggle to keep up with the fast-moving sector.
Elliptic summarizes the problem facing DeFi projects in its report as follows:
Many cybersecurity startups are relatively immature, and the irreversible nature of crypto transactions makes recovering these funds very difficult.
This made them tempting targets for attackers, from lone pirates to nation-states.
And sometimes cybersecurity errors are not unintentional, but rather the product of backdoors provided by their creators to steal users’ money.
According to Elliptic, in the past two years, $2 billion has been stolen directly from DApps.
Losses in 2021 exceeded 10 billion dollars due to the rise in the value of digital currencies.
The vast majority of losses from the past two years, $8.6 billion, came from Ethereum, the home of decentralized finance.
Many lending protocols such as MakerDAO, decentralized trading platforms such as Uniswap, derivatives products such as Synthetix, and other protocols built on the Binance Blockchain have been built on Ethereum, which have been responsible for $2.5 billion in losses since 2020.
According to Elliptic, users should be more interested in lending protocols, which allow people to borrow cryptocurrency from groups of their peers.
These protocols, which are responsible for more than a third of losses, are just as vulnerable to code exploits as they are to fluctuations
As the decentralized finance space matures, attacks may be limited to vulnerable protocols and risky platforms.
For now, Elliptic wants users to stay alert.
She says DeFi has become a tempting magnet for hackers and scammers.
Which we fully agree with in the Arab Bitcoin, the need for the user to take precaution and caution to stay safe from such fraudulent operations.
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