Decentralized financial platforms are becoming increasingly vulnerable to fraud and theft. According to a recent study by Elliptic, losses on these platforms have amounted to 10.5 billion this year alone.
The rapidly growing but unregulated DeFi platforms also allow lending and savings, usually in a cryptocurrency, bypassing traditional financial institutions and banks altogether. As a result, advocates say the technology will enable cheaper and more efficient access to financial services. The DeFi sector is attracting more capital as cryptocurrencies become increasingly popular.
However, experts say there is widespread crime in the unregulated sector. London-based Elliptic says that most of the losses have been suffered by users in the app, lending platforms, and stock exchanges. According to the report, criminals immediately jump on bugs in the platform code and use the system to launder money.
Decentralized platforms want to ensure that third parties do not have the user's funds and the platform is secure, but of course, that's not always the case.
There is an estimate that 86 billion Dollars is currently stored on DeFi platforms, up from 12 billion dollars a year ago. The industry's largest theft to date, a hacker stole $610 million in cryptocurrency from Poly Network in August. However, they returned most of the funds.
