November 23, 2021

DeFi Industry Crime Rises 600%, Losses RM44 Billion Throughout 2021

 2021 can be said to be a year that saw a surge in the growth of the DeFi sector or decentralized finance, especially after China decided to ban activities related to cryptocurrency trading.

Based on a study from DeFi Llama, the DeFi protocol saw growth in total locked -in value from $ 22 billion (RM9.2 billion) in early 2021 to over $ 260 billion (RM1.1 trillion).

The records cover all aspects of financial services including asset management, loans, decentralized exchange (DEX), derivatives, and stablecoins.

However, behind the ‘excitement’ of the industry’s growth, there are hidden incidents that are not pleasant to investors.

Be aware, DeFi is a space where users do not need third parties to interact with each other. This means investors interact directly without the presence of a bank, instead relying solely on smart contracts at lower costs and better financial inclusion.

As a result, the sector is exposed to the risk of network hacking activities and money laundering through a deep pool of liquidity.

In fact, the illegal exploitation and use of decentralized technologies such as decentralized applications (dApps) (known as ‘DeCrime’) has also increased.

Data from Elliptic reveals the losses incurred across the DeFi platform have exceeded $ 10.5 billion (RM44 billion) over 2021. This record is an increase of 600% from the $ 1.5 billion (RM6.3 billion) value level in 2020.

Meanwhile, dApps in Ethereum lost $ 8.6 billion (RM36 billion) and Binance Smart Chain (BSC) lost $ 2.5 billion (RM10.5 billion).

Where are the shortcomings so that they become the target of criminals?

Elliptic said one of the factors in such incidents is due to an immature and untested decentralized technology ecosystem that has become a victim of bug attacks, code exploitation and admin keys.

So, it’s no wonder why supervisors around the world are starting to act decisively with financial services innovations like DeFi and stablecoins.

In order for them to want to support the advances introduced, the authorities also need to take action to protect consumers.

So far, it can be seen that several countries and agencies have begun to actively compile appropriate laws. Examples are the global agency overseeing money laundering and terrorist financing, the Financial Action Task Force, and the countries of Singapore and Hong Kong.