LONDON, Nov 18 (Businesshala) – Frauds and thefts on decentralized finance platforms have totaled $10.5 billion so far this year, research showed Thursday, adding that risks remain low in the fast-growing but still mostly unregulated sector of cryptocurrencies. Is.
So-called DeFi platforms allow users to lend, borrow and save – usually in cryptocurrencies – while bypassing traditional gatekeepers of finance such as banks. Proponents say the technology provides cheaper and more efficient access to financial services.
Cash poured into DeFi sites this year, indicating an explosion of interest in cryptocurrencies as a whole. Many investors, who have historically faced low or sub-zero interest rates, are attracted to DeFi by the promise of high returns on savings.
Yet crime is booming in a mostly unregulated sector, according to London-based blockchain analytics firm Elliptic. Users have lost more than $12 billion through crime on DeFi apps, lending platforms and exchanges since 2020, with most of that loss in 2021 alone, it found.
The code and design flaws allow criminals to target DeFi sites, Elliptic found, with deep pools of liquidity allowing criminals to launder proceeds of crime while leaving few traces. It added that scams are also common.
“Decentralized apps are designed to eliminate any third party control of users’ funds,” said Tom Robinson of Elliptic. “But you must still trust that the creators of the protocol did not make any coding or design mistakes that could lead to a loss of funds.”
Major DeFi platforms say they take a variety of measures to strengthen security, from hiring outside firms to audit code for vulnerabilities, including the keys and passwords needed to access a user’s wallet in a secure environment. in order to maintain.
According to sector tracker DeFi Pulse, approximately $86 billion worth of cryptocurrency is currently stored on the DeFi platform, up from $12 billion a year ago.
Major investors have also bet heavily on the sector’s growth, with Canadian pension fund Cais de dépét et placement du Québec participating in a $400 million investment in leading lending platform Celsius Network last month.
DeFi site Poly Network was rocked in August by a crypto theft worth $610 million, the biggest ever — though the hacker later returned almost all of the loot.