According to a fresh report from CipherTrace, cybercrime and thefts have hit the decentralized finance (DeFi) sector hard this year.
While the DeFi world has been thriving on the surface, crime targeting the industry has also flourished. A recent report from cryptocurrency intelligence firm CipherTrace indicated that over the last seven months, crime in DeFi hit an all-time high. According to the intelligence gathered, losses stemming from hacks, fraud, and thefts in DeFi totaled around $474 million between January and July.
This comes at the same time that losses from crime in the cryptocurrency market as a whole dropped have dropped overall. CipherTrace found that in 2019 and 2020, losses totaled $4.5 billion and $1.9 billion respectively. However, this year that number has only reached $681 million as of the end of July.
In an email to Reuters, CipherTrace’s chief executive officer Dave Jevans said that,
“It shouldn’t come as a surprise that as the DeFi ecosystem expands, so are DeFi crimes. Just eight months into 2021 and DeFi hacks, thefts, and frauds have already surpassed the total DeFi crimes from 2020. This means regulators around the globe are paying closer attention to DeFi specifically.”
The report goes on to say that DeFi crimes can be put into two distinct categories. ”either a hack of a DeFi protocol by outside agents or a rug pull conducted by insiders.” CipherTrace added that the majority of these attacks in 2021 have been done by outside agents, with just 24% being inside jobs.
The report adds that a common trend found when looking into DeFi hacks is the use of flash loans. These loans have been used in a majority of the attacks highlighted by the investigation. CipherTrace believes that because flash loans require zero collateral or KYC, “It is increasingly difficult to catch bad actors using them to fund their attacks.” CipherTrace is under the impression that the issue stems from the unaudited smart contracts that these flash loans utilize.
Major DeFi hack occurs on same day report is released
As if to add credibility to the report, a theft being called one of the biggest in the industry occurred on the Poly Network earlier on Aug 10. Initial reports state that more than $600 million was stolen, almost matching all the stolen funds over the last seven months combined.
In the hours following the attack, Poly Network released a statement along with addresses for the two wallets responsible. So far, around $33 million of the funds have been frozen on Tether, according to Paolo Ardoino. Poly Network tweeted a statement reaching out to those involved and attempting to work out a resolution.
The tweet states that due to the nature of the theft, and the amount taken, it would be wise for the offender to give the money back to the community members affected.