The hype is on and raging as the DeFi sector continues to top new heights in its capitalization, reaching $85.03 billion in late March of 2021. Though the DeFi market is booming, a more shadowy aspect of the industry is also reaping the rewards of bursting capitalization. The security of DeFi networks is in question as the volumes of funds crossing through the platforms are increasing. A slew of recent attacks has once again raised the issue of the need for better protective measures for decentralized financial solutions.
First Hacks and Breaches
The woes of DeFi on the security level started to surface in April of 2020, when the popular Uniswap and Lendf.me lending platforms were subjected to a series of massive hacker attacks that stripped them of over $25 million in funds. Subsequent analysis revealed the attackers were able to exploit a weakness that was identified earlier by OpenZeppelin – a security firm specializing in decentralized infrastructures.
A year later, the issue resurfaced, when in February of 2021, the bZx platform used for margin trading and lending operations was brutalized by two major breaches. The ingenious scheme applied by the hackers involved manipulation of the oracles to steal the users’ funds through the use of leveraged loans.
Such outreach of the hackers from the digital into the real world in their scope of attack strategies signals a dangerous trend in the evolution of threats facing DeFi.
The Weak Link
Prosaic as it may seem, human error is largely at fault in virtually all of the attacks on decentralized platforms, as the hackers merely need to find some weakness to latch onto – a weakness provided by careless users or poor security auditing.
A single source of failure is out of the question in blockchain networks, which operate on a peer-to-peer principle, unlike client-server networks. But that does not make them immune, as the hackers turn to inattentive users as the source of failure, or the underlying infrastructure, seeking for weaknesses that could lead to network back-doors or direct access to an active administrator account.
The Deloitte Global Blockchain Survey, issued in 2019, highlights the vulnerabilities of decentralized networks, as 53% of organizations surveyed stated that blockchain is of critical importance, while 83% saw applications for the technology in their business. But, 50% of the same respondents stated that privacy-related issues are still critical, as blockchain transparency is a double-edged blade.
The 2019 Cost of a Data Breach Report from IBM, stated that the cost of an average data breach in the US alone has grown from $3.54 million in 2006 to $8.19 million in 2019 – a 130% increase over 14 years, highlighting the growing skills of the attackers and the lagging of network security.
There are numerous avenues that blockchain and DeFi platforms could take to bolster security measures.
Among the most obvious is extensive pre-launch testing, which would…
Read More: finance.yahoo.com