DeFi: The latest frontier of cryptocurrency hacking

Helen Dunmore

For most of the 13 years of cryptocurrency, exchanges were the center of cyber robbery. Today, the risk of hacker attacks in the growth sector is exploding. Last week, PolyNetwork was one of these sites.

Largest thefts in history

It was at the center of a $610 million cryptocurrency theft, one of the largest thefts in history.

Within a few days of the robbery, the Decentralized Finance platform stated that “white hat” hackers or hackers returned almost all the spoils.

The extraordinary ending of the Polynetwork story believes in the rapidly emerging risks in this growing corner of cryptography. It holds an estimated US$80 billion, according to interviews with industry executives, lawyers and analysts.

DeFi sites allow users to lend, borrow, and store cryptocurrency, often bypassing traditional financial gatekeepers such as banks and exchanges. Proponents say that technology provides cheaper and more effective financial services.

Potential thieves can usually take advantage of errors in the open-source code used on the site. Regulations are still insufficient, with little or no reliance on victims.

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Centralized exchanges that act as intermediaries between buyers and sellers of cryptocurrency used to be the main target of the crypto cyber robbery.

For example, the Tokyo-based exchange Mt.Gox went bankrupt in 2014 after losing $500 million in a hack. Coincheck, also located in Tokyo, was robbed of US$530 million in 2018.

Many major exchanges dedicated to attracting regulatory attention and attracting mainstream investors have since increased security, and robberies of this scale are now relatively rare.

Enforcement measures

Gary Gensler, chairman of the US Securities and Exchange Commission, recommends taking a strict stance on DeFi.

In a speech this month, he stated that such platforms may be caught by US securities laws and called on Congress to draft a bill to curb DeFi and crypto trading.

This month, the US Securities and Exchange Commission claimed that it had taken the first enforcement action involving DeFi technology, which issued unregistered securities and misled investors. The SEC did not answer further questions about this position.

U.S. Commodity Futures Trading Commission officials also showed stricter scrutiny.

In other places, it slowed down. For example, DeFi is far from the political agenda in the UK.

A spokesperson for the UK financial regulator said that some DeFi activities may be included in this scope, but many departments are not regulated.

For some analysts, stricter supervision is inevitable, and there are few signs that DeFi sites can work.

“Unfortunately is considered an average Tuesday in the DeFi world,” said Tim Swanson of the blockchain company Clearmatics.

“The industry likes to bless by claiming to be built on a transparent system, but it has repeatedly shown that it can’t beat itself.”

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