According to the latest report from Chainalysis, last year was the worst year ever recorded for cryptocurrency hacks. The year 2022 saw the largest ever crypto hacking, with cryptocurrency businesses losing a around $3.8 billion in crypto.
According to a report, 82% or $3.1 billion of all cryptocurrency theft by hackers in 2022 was attributed to decentralized finance protocols, known as DeFi protocols.
DeFi protocols utilize written codes to regulate the usage of virtual currency on blockchain networks. Smart contracts, a form of digital contracts, play a crucial role in DeFi. These publicly accessible sets of instructions allow for borrowing, lending, and transactions without intermediaries. Transactions occur automatically once the terms and conditions outlined in the smart contract are met.
DeFi is a rapidly growing and attractive aspect of the cryptocurrency space, primarily due to its transparency. Transactions in DeFi occur on the blockchain and the governing smart contract code is publicly visible, allowing users to fully understand what will happen to their funds. This transparency is particularly appealing in 2023 after many centralized cryptocurrency businesses faced issues due to a lack of transparency in their actions and risk profiles. However, this same transparency also leaves DeFi vulnerable as hackers can scan for vulnerabilities in the code and exploit them for theft.
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