Decentralized finance (DeFi) platforms have received a lot of attention in recent years. Unfortunately, they also get a lot of attention from villains.
In fact, according to a Chainalysis study, the transfer of cryptocurrencies from illegal digital wallets to DeFi platforms surged by nearly 2,000% between 2020 and 2021 alone. Cryptocurrencies and the use of DeFi networks are booming, although fraud may be diminishing. Last year, according to Chainalysis, 2021 turned out to be the last of three years when crypto exchanges did not process more than half of the transactions of malicious persons.
“I think this year is the year DeFi is going into criminal activity. Not only does it mean that the DeFi protocol has been hacked, but in the prepared release, Kim Grauer’s Director of Chains Analysis said: For money laundering “
Chainalysis discovered that in 2021 $ 8.6 billion of cryptocurrencies were transferred from an illegal wallet to the service.
James McQuiggan, a security conscious advocate for KnowBe4, said the DeFi platform is becoming more and more attractive as cybercriminals grow.
“”[Bad actors] We are currently using cryptocurrencies and exchange organizations to target vulnerable perimeter systems that use social engineering attacks, have out-of-date security updates, or are exposed to other exploits. “
According to more extensive research, this is a growing problem in crypto finance in general.
About $ 3.2 billion was stolen through the DeFi system, and $ 1.3 billion was stolen in the first quarter of this year alone. Only two years ago, less than one-third (30%) of stolen digital data came from DeFi. According to a Chainalysis survey, most of the cryptocurrencies acquired this year, 97%, were stolen from the DeFi platform, not the exchange.
Example: DeFi systems like the recently hacked Beanstalk are still relatively new and serve as a compelling opportunity for hackers to take advantage of new security protocols, according to Jim Ducharme, Chief Operating Officer of Outseer, which manages payment validation. To do. ..
“While decentralized financial systems are attractive to many, storing such sensitive information in a wide network of ledgers is likely to allow hackers to slip through undetected and steal large amounts of money in a blink of an eye. It will be, “says Ducharme.
Aite-Novarica’s strategic advisor, Tari Schreider, said the DeFi system “evolves almost every day, but has little history to look back on.”
Therefore, “cyber robbery” like the recent Beanstalk intrusion is a “gap” where attackers are exploiting the openings in these new systems.
However, even as these new payment platforms begin to adopt a more traditional approach to security, “defining rules on how crypto-based or traditional financial systems operate quickly becomes complex and complex. Brings the potential for unpredictable results, “said Cerberus Sentinel, President of Solution Architecture.
In the traditional financial world, even if technically “following the rules”, there are inherent inefficiencies and safeguards to prevent or reverse damaging transactions, many of which result from painful experience. is. “It’s an astronomical amount that can be compromised by finding mistakes in smart contracts, creating a very attractive target for attackers.”
These DeFi incidents (such as Beanstalk) can carry benefits as well as risks.
“With hundreds of millions of people, this will be scrutinized not only by the smartest hackers in the world, but also by large organized crime and even the nation-state,” Clements said. “This does not explain the potential for insider disruption by deliberately introducing such a vulnerability. Its motivation is astounding.”