According to a new report by crypto analytics firm Elliptic, fraudulent activity on decentralized financial platforms (DeFi) has resulted in up to $10.5 billion in total losses.
The sudden influx of funds into the sector has led to a rise in crime
DeFi platforms make crypto transfer easier for many by allowing users to lend, borrow and save crypto using smart contracts. The industry eliminates traditional banks as intermediaries and makes financial transactions straightforward. The industry is still considered unregulated, making it more vulnerable to hacks and fraud. According to blockchain data analytics firm Elliptic, this resulted in $10.5 billion in losses in 2021.
Elliptic states in its report that the sudden influx of funds into the sector has led to a rise in crime. Some of the money has been used to promote illegal activities. It has also become clear how hackers exploit decentralized applications to carry out illegal financial activities. Numerous Dapps have been exploited in recent months, resulting in stolen funds.
Different types of DeFi apps were affected
In 2020 and 2021 , a total of $12 billion was stolen through DeFi exploits. The hackers who carried out DeFi attacks used a variety of strategies. 5.5 billion dollars in losses were caused by code exploits, and another 5.3 billion dollars were caused by economic exploits. Admin key exploits caused another $1 billion in losses, while “rug pulls” or exit scams caused $18 million in losses.
Different types of DeFi apps were affected to varying degrees. Decentralized exchanges accounted for 17.1% of losses, wealth management apps accounted for 16.4% of losses, and cross-chain bridges accounted for 13.5% of losses. Lending apps accounted for 34% of losses. Two blockchains were the primary target of losses identified by Elliptic. Ethereum-based DeFi apps were responsible for 71% of total losses, while Binance smart chain-based apps accounted for 21% of total losses.