Hacking, theft, rug pulls, and fraud, these decentralized financial exploits cost DeFi users a total of $10.5 billion in 2021, up from $1.5 billion in revenue. last year According to a new report from risk management company Elliptic.
Decentralized Finance, or DeFi, refers to the applications that use it.BlockchainThat allows people to look beyond banks and other traditional financial intermediaries to borrow, borrow or trade money with one another using automated smart contracts connected to the protocol.
More than $250 billion of assets flow through the sector. based on information collected by DeFi Llama which as recently as June 2020 this figure was less than $1 billion. which increased the use of protocols It comes with increased prices for coins and governance tokens that power them.
Elliptic report hot off the press today, revealing #DeFi users and investors have suffered more than $12 billion in losses due to theft and fraud!
DeFi: Risk, Regulation, and the Rise of #DeCrime
Get your copy todayhttps://t.co/QrLzPbR1qX#Crypto #AML #riskmanagement pic.twitter.com/9ilgCttiN7
— elliptic (@elliptic) November 18, 2021
But its growing popularity also means that DeFi has more money to be stolen. Elliptic sums up the problems facing DeFi projects in its report: “Many startups have low cybersecurity. And with the irreversible nature of crypto transactions. This makes it very challenging to recover these funds. This has made them target attacks from single hackers all the way up to the national level.”
And sometimes cybersecurity errors are not accidental. Rather, it’s the intention of product creators who secretly put backdoors in to steal users’ money.
According to Elliptic, over the past two years $2 billion has been stolen directly from decentralized applications. These losses are considered to reduce consumer confidence in the product.
Most of the losses from the past two years split into $8.6 billion on Ethereum, which is like the home of Ethereum. With decentralized finance and the Binance Smart Chain protocol, losses are estimated at $2.5 billion since 2020.
According to Elliptic metrics, lending protocols are the most worrying. This is because losses account for more than a third of all losses. These protocols are vulnerable to code exploits. The same is true for other exploits such as flash loans.
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