DeFi-Based Projects Sees Highest Number Of Exploits In 2022 – Report
Last year has been the most challenging for the Web3 and decentralized finance (DeFi) ecosystems, as security compromises pushed the virtual technology space to the brink of collapse. Major exploits and attacks were a reoccurring theme as the industry lost over $2 billion in 2022.
A Report On Web3 Security
DeFi exploits in 2022, like the Ronin Bridge attack and the Nomad hack, have taken the spotlight and made headlines among the top security breaches in the digital finance environment. According to the Beosin Global Web3 Security Report 2022, of the 167 major security breaches in the digital asset industry over the past year, DeFi platforms witnessed the highest and are more vulnerable to future hacks.
In addition, the report explained that DeFi projects had seen 113 attacks, accounting for a whopping 67.6% of the recorded hacks. Furthermore, attacks on non-fungible token (NFT) projects come second, followed by cross-chain bridges and custody wallets.
The report noted that in terms of monetary losses from the hacking attacks, DeFi projects came in second with a total loss of $950 million. This is followed by the $1.89 billion losses recorded in cross-chain bridge exploits in the same year.
A breakdown of the recorded losses shows that attacks in 2022 led to $3.6 billion across all projects. This shows a 47.4% increase from 2021, with a loss of $2.4 billion from DeFi security exploits.
As expected, there have been increased concerns about the possibility of more attacks on DeFi protocols in 2023. The increasing rate of exploits on DeFi comes as the industry sees regular cash inflows from investors.
However, experts noted that the DeFi space has become attractive to attackers due to several factors. The rise of new DeFi projects, the lack of robust security testing before launch, and the value of the project are some of the reasons hackers are likely to invade space often.
Blockchain security firms have warned users to safeguard their private security keys as funds lost to private key compromises will be high in 2023.
How The DeFi Sector Contributes To Its Decline
Decentralized finance adoption peaked in 2021 during the broader crypto market rally, and since then, the DeFi sector, like other digital asset sectors, has continued to decline in value. However, despite the influence of the global market in the decline of the DeFi sector, token developers also have a hand in the industry’s fate by developing unsustainable high-yield tokens and the absence of cybersecurity.
The lack of robust security has been the most talked-about issue in the space due to the series of exploits on DeFi bridges and protocols over the past year. With developers not prioritizing security due to many DeFi projects, internal and external hacks of reserves and user wallets are likely to continue. However, industry security experts attributed this to the weak security infrastructure of the industry.
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