Despite the growth of decentralized finance (DeFi) that has pushed the overall Total Value Locked (TVL) from just about $500 million in November 2019 to just over $247 billion today, the ecosystem is not devoid of scams and exploits. A new research report from London-based blockchain analytics firm, Elliptic has shown that the total amount of loss on DeFi platforms today is pegged at $12 billion with funds belonging to investors.
DeFi is considered one of the most innovative expressions of blockchain technology. With applications governed through smart contracts, DeFi protocols offer investment products similar to traditional banking. These products typically include lending and savings with higher interest rates respectively.
The embrace of DeFi across various blockchain platforms has attracted cybercriminals who seek tiny exploits to stripe users of their funds. Per the Elliptic report, about $10.5 billion was lost to theft and crime across DeFi platforms, representing more than 600% of the $1.5 billion recorded in the year-ago period.
“The DeFi ecosystem is an incredibly exciting and fast-moving space, with financial services innovation happening at light speed. This is attracting large amounts of capital to projects that are not always robust or well-tested. Criminal actors have seen the opportunity to exploit this,” said Tom Robinson, Chief Scientist at Elliptic.
Getting Better with Maturity
Earlier in September, TheCoinRise reported that almost $13 million worth of tokenized Bitcoin was stolen from the DeFi hack on Binance Smart Chain-based cross-chain platform called pNetwork, one of the many related exploits to be recorded in the DeFi worlds to date.
The Elliptic report suggested that the prevalence of exploits is based on the fact that the ecosystem is still developing, and with increasing development, we would move away from the risky stage DeFi currently is now.
“DeFi looks set to become an increasingly important part of our financial system, making financial services more accessible, efficient, and competitive. But we are still at the experimental stage and DeFi users face significant risks. As the technology matures and becomes better-regulated, losses will fall and DeFi will become a practical alternative to the banks, asset managers, and exchanges that we currently rely upon,” Robinson added.