Cryptocurrency investors are reportedly exiting the decentralized finance (DeFi) space after two high-profile hacks.
Nearly $14 billion has been withdrawn from DeFi projects in recent weeks, the Financial Times (FT) reports. I mentioned Wednesday (May 6), citing data company DefiLlama.
This came after hackers were linked to the North Korean government He stole $290 million from Kilbdaw The stolen money was used as collateral to borrow $230 million from them ghostthe largest lender in this sector. Weeks ago, hackers He stole $280 million From DeFi exchange Drifting.
The Financial Times describes these incidents as a major blow to decentralized finance, which replaces intermediaries such as banks and brokers with automated contracts. The report added that blockchain security is crucial in this sector. These incidents also occurred at a time when he was… The traditional financial world It is experimenting with blockchain adoption.
‘The repercussions are serious’ Lucas Qiana research associate in the Cryptographic Group GalaxyHe told the Financial Times. He added that the hacks “undermine arguments that cryptocurrencies provide a safer and more transparent alternative to legacy financial instruments.”
According to the report, Decentralized finance The space saw a growth spurt in 2020, with the market size swelling from less than $1 billion to about $180 billion in 2021.
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The Financial Times added that the sector has since expanded into a tangled network of financial applications, although these connections were revealed as a barrier after the hacks. Since then, the market has shrunk to approximately $86 billion.
In a recent episode of “from the block” Podcast, PYMNTS CEO Karen Webster and Ryan RougeGlobal Head of Digital Assets for Citi Treasury and Trading Solutionsfind out why the Kelp DAO incident was a technical and behavioral failure.
While previous attacks targeted private keys or flawed smart contracts, this hack involved the connective tissue of blockchain ecosystems: the messaging layer that allows for cross-chain interoperability.
“Previous hacks were due to stolen keys or errors in smart contracts, and this operation convinced the vault that the thief was actually the owner,” Rogge said.
As PYMNTS wrote, the incident Highlights stress Between cryptocurrencies’ desire for open and interoperable systems and institutional demand for security and control.
“Is this delaying Institutional adoption Of decentralized finance? “Maybe,” Rogge said. “This will take some confidence away from the market.”
However, she stopped short of calling the hack a clear setback, adding that any institutionally driven decision would likely depend on whether companies are able to implement “proper redundancy and security at every layer where trust exists.”
