While barely recovering from the devastating effects of the Curve Finance platform hack which happens to be the biggest hack in DeFi history, the DeFi ecosystem finds itself again being stunned by a new hack. The target, the SteadeFi protocol, lost $334,000 in this attack. This shower of attacks quickly destabilized the ecosystem and began to erode market confidence in an ecosystem that nevertheless has a bright future ahead of it. Like rescuers, the companies Microsoft, Binance and Coinbase are jumping at the chance and releasing new cards. The game is restarted.
Hack-proof DeFi: nearly $730 million already lost in 2023
Invisible, but permanent, the threat of hacks continues to weigh on the ecosystem of decentralized finance. The DeFi market loses several million dollars every year in all-out hacks. The statistics leave you speechless.
In all, more than $667 million was lost in the first half of 2023. Statistics indicate that Ethereum, which happens to be the leading DApp and DeFi network, had the largest loss, which stands at 82, $5 million.
The BNB Chain, meanwhile, has managed to hold the record for the frequency of attacks. In the second quarter of the year alone, it was the victim of 65 hacks. In this quarter alone, the losses recorded by DeFi protocols are more than $204 million. Clear, the DeFi ecosystem is in the grip of a ruthless war of hacks.
Very recently, two major protocols were hacked, which affected the performance of DeFi tokens as a whole. These are Curve Finance, the largest decentralized stablecoin swap platform with a total locked value of $2.4 billion and the SteadeFi platform.
Top 100 DeFi tokens losing value with losses for some
The Curve Finance hack was the biggest hack in the history of decentralized finance. With a total loss of $62 million, it was a real blow to Curve Finance. The CRV couldn’t get over it. The Curve platform had not yet recovered from this blow when the development team of the SteadeFi protocol announced on X on August 7 that the platform had been hacked and that “all funds are currently at risk”.
The total crypto funds taken away was nearly $334,000 and the event caused SteadeFi’s total locked value to drop. This recurrence of unfortunate occurrences does neither a service to DeFi players nor to the ambitions of the ecosystem.
Indeed, in the aftermath, the top 100 DeFi tokens by market capitalization performed mixed and losses were recorded in most cases. Fortunately, initiatives launched by three major companies, namely Microsoft, Binance and Coinbase, have restored confidence in the market and breathed new life into the ecosystem.
Microsoft, Binance and Coinbase breathe new life into the DeFi ecosystem
With the series of hacks and their impact on tokens, Binance’s investment arm, Binance Labs, stepped in to restore the reputation of CRV which saw its trading volume drop from $3.2 billion to 1.6 billion dollars in less than 24 hours. With a $5 million investment in CRV, Binance breathed new life into the token after some of the siphoned funds were returned by the Curve hacker. After Binance, Microsoft also stepped in.
Indeed, a few days ago, Microsoft signed a partnership with Aptos Labs to reinvent digital payment. The partners will use Microsoft’s Azure OpenAI infrastructure to boost the adoption of Web3 solutions by banking and finance professionals. This agreement allowed the APT token of the Aptos network to experience an impressive growth of 11.6%.
This initiative by Microsoft and Binance comes on top of that of Coinbase which, on February 23, 2023, launched Base, a new decentralized platform on Ethereum. Capitalizing on the novelty, several Web3 developers rushed to launch apps, which invigorated the DApps and DeFi ecosystems.
Is Decentralized Finance really safe ground?
It is important to note that the initiatives launched by Coinbase, Microsoft, Binance do not aim to strengthen the security of DeFi protocols. The problem remains. Does DeFi provide the security required to merit mainstream adoption?
Some crypto experts attribute the increase in hacks to factors such as event broadcasts, lack of input validation, centralization issues, lack of compiler version locking, etc.
Even if DeFi is not the prerogative of hacks, these vulnerabilities erode the confidence of the ecosystem which aims to constitute a pillar in the digital economy. With payment industry giants such as PayPal, MasterCard and MoneyGram entering the crypto market, blockchain security must be guaranteed more than ever.
DeFi is about to take on a larger scale and embark more applications and more users. Major financial institutions may soon agree to tokenize their customers’ bank deposits. These asset and payment tokens can then be sent into the digital currency economy and can move on the blockchain together with CBDCs and stablecoins, which will revolutionize the cross-border payments industry.
But to have the support of States and major financial institutions, in this case central banks, that of companies and individuals, convincing security solutions must be put in place. That said, we have to believe that the DeFi market has still reached an impressive level of maturity.
Indeed, despite multiple hacks, it is surprising to note that the total value locked in DeFi protocols has remained in the $50 billion range, reflecting the resilience of the sector. Separately, the developers of Curve have promised to refund users’ funds. Moreover, 79% of these siphoned funds have already been recovered to date.
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