Despite most people seeing potentials in the crypto market, they can testify that the industry needs to eliminate some elements. Elements like scams and hacks are one of the reasons why traders are shying away from the market. Despite the decentralized finance market providing traders with massive opportunities to invest and profit, some individuals still steal from other traders. According to a report by Elliptic, a firm specializing in risk management, the decentralized finance market has lost more than $10 billion to hackers and fraudsters.
DeFi protocols TVL reaches $250 billion
Decentralized finance allows traders to carry on activities such as trading, lending, and borrowing without the need for a financial institution. To carry out their activities, the protocols provide traders with smart contracts that they can communicate with. A previous report by analytics firm DeFi Llama mentioned that about $250 billion worth of digital assets is locked in the sector. The most surprising fact behind that figure is a little bit below $1 billion in June.
The rise in the figure has been attributed to the massive locking of funds in the sector and the rise in the price of native tokens of protocols. Another reason is that the DeFi sector has gradually shifted from its home ground on Ethereum to other networks. With that, blockchains such as Solana and Binance Smart Chain provide hackers with more access to funds.
Elliptic report breakdown
The Elliptic report notes that most emerging protocols are not doing their groundwork in terms of security before creating the protocols. It also said that since crypto transactions cannot be reversed, the protocols cannot access their funds if they get stolen. The two reasons above are the main reasons why hackers are going after them instead of establishing protocols.
The report also said that the creators of the protocols are to be blamed sometimes as they are aware of the back doors that hackers can access. It notes that most time, they decide to leave it open to take funds for themselves. The Elliptic report says that decentralized applications have suffered a cumulative loss of $2 billion in the last two years. The other loss of $10 billion is just the poor performance of tokens and the activities of hackers in the industry. Although one cannot pinpoint why the tokens are bad, the report said it is mainly due to traders leaving the market.
Protocols on Ethereum are culpable for the loss of $8.6 billion over the last two years. The platforms that have contributed the most to the loss are MakerDAO, Uniswap, and Synthetix. The other $2.5 billion loss witnessed has resulted from protocols on the Binance Smart Chain. The Elliptic report also said that traders should be wary of lending platforms, which allow traders to lend and borrow assets. In conclusion, Elliptic wants traders to be careful and expects that regulations in the future will reduce the rate of hacks and scams in the sector.