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Cybercriminals Heavily Exploited Centralised Parts of DeFi: Report

Decentralised Finance (DeFi) sector is still reliant on centralised networks, breaching which has become easier for cybercriminals over the years. In 2021, the centralised elements of the DeFi protocol were breached by cyber criminals, costing over $1.3 billion (roughly Rs. 9,606 crore) in losses, as per a report. DeFi allows financial products to appear on a public blockchain network which is not regulated by a central bank or intermediary.

In a new report, blockchain research firm CertiK said that 44 DeFi hacks were responsible for losses worth $1.3 billion (roughly Rs. 9,606 crore) last year.

The vulnerable points in the DeFi systems were those still working on regulated servers rather than on the blockchain network.

“Centralisation is antithetical to the ethos of DeFi and poses major security risks. Single points of failure can be exploited by dedicated hackers and malicious insiders alike,” the report said.

DeFi systems, majority of which are built on the Ethereum blockchain, aim to provide an autonomous and decentralised option for financial services.

The DeFi sector bagged nearly $60 billion (roughly Rs. 4,43,310 crore) by December 2021, the report said.

Recently, a study by analytics firm ImmuneFi claimed that DeFi hacks and related scams exceeded $10 billion (roughly Rs. 73,885 crore) over the past year.

However, researchers have also noted that elements of the crypto space like the DeFi sector will continue to get safer as more workload shifts from servers to blockchain networks.

The losses recorded in 2021 represented only 0.05 percent of crypto’s total market capitalisation, down 17 percent from the previous year.

The cryptocurrency market rose to a capitalisation of $3 trillion (roughly Rs. 2,15,66,720 crore), the highest it has even been so far last year.

Interested in cryptocurrency? We discuss all things crypto with WazirX CEO Nischal Shetty and WeekendInvesting founder Alok Jain on Orbital, the Gadgets 360 podcast. Orbital is available on Apple Podcasts, Google Podcasts, Spotify, Amazon Music and wherever you get your podcasts.

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