The DeFi sector is on track to record an unexpectedly low valuation in total assets lost due to exploits.
The Decentralized Finance (DeFi) world remains susceptible to crypto losses through malicious actors. DeFi protocols receive constant attacks, resulting in huge financial losses annually. However, in what appears to be a pattern shift, on-chain data suggests that these attacks may be on the decline.
IntoTheBlock’s post on X shared a chart detailing the frequency of attacks by dubious elements against DeFi protocols. The figures reveal that “only” $1 billion has been lost to malicious exploits this year. This figure signals a decreasing rate of DeFi attacks compared to previous years. The apparent decline is linked to some factors, including overall security enhancements.
Is DeFi Security and Risk Management Improving?
These attacks on DeFi usually occur due to identified vulnerabilities in these protocols. Once hackers notice any exposure on a platform, they generally find a way to compromise it and steal funds. The decline in losses suggests that the DeFi industry is improving its security systems.
Additionally, the decreasing number of attacks could result from better risk management practices and advancements in smart contract auditing. The heightened awareness and vigilance of DeFi platforms and users alike have helped reduce the frequency of attacks. This awareness has made users more cautious while carrying out their transactions.
Analysts project that if the current trend continues until year-end, 2024 might go down as a historic year in the DeFi industry – with significantly reduced financial losses. If that happens, it could have far-reaching implications in system design among prospective protocols eyeing launch.
In addition, it will boost investors’ confidence in the space. Prospective investors will begin to see the sector as safe and willing to commit funds. Despite the WazirX hack and DMM Bitcoin exploit, stakeholders look forward to the year ending with no other major compromise in the sector.
A Signal for DeFi’s Future?
Previous years reveal that the attacks were more frequent. Worthy of note, in April 2021, the DeFi sector suffered its greatest loss. When the hackers struck, assets valued at approximately $2 billion were lost. July and October 2021 also recorded high levels of attacks on DeFi platforms.
A similar scenario played out the following year, 2022. The losses witnessed in these security breaches were significantly high in January and April.
As earlier reported, one such exploited platform, Mixin Network, had to suspend all withdrawals and deposits in 2023 following an attack. In that incident, hackers compromised the protocol’s cloud service database, causing it to lose about $200 million in crypto assets.
Given the frequency of malicious attacks on DeFi protocol, Coinspeaker enlightened the broader crypto space on sandwich attacks at the beginning of this year. Notably, sandwich attacks manipulate the price of targeted assets. DeFi users have been encouraged to familiarize themselves with different attack methods to safeguard their assets.