DeFi-related attacks exploded in 2020

A new report from CipherTrace notes that decentralized finance (DeFi) crimes are on the rise this year. They thus explode completely compared to the year 2019.

The volume of crypto crimes on the rise in 2020

According to the CipherTrace report , non-DeFi „generic“ crypto attacks amounted to $ 51.5 million in the first half of 2020. The trend has been up for the second half, as so far CipherTrace reports 292 millions of dollars in “ hacks and other thefts“ .

However, the DeFi sector is also growing. According to the report, decentralized finance accounted for 45% of all thefts and hacks ($ 51.5 million, or 40% of the volume that was hacked). For the second half of the year, DeFi currently represents 50% of all thefts and hacks ($ 47.7 million, or 14% of the volume).

DeFi: a new El Dorado for hackers?

According to CipherTrace, the volume of DeFi hacks was “ almost negligible“ for the year 2019 . The trend is therefore quite recent: the domain has completely exploded during the last summer. What is more, funds from „classic“ attacks could now be laundered thanks to DeFi.

The report recalls that it was the KuCoin hack that drove the volume up in the second half of the year. He allowed the attackers to walk away with $ 281 million . If we remove this particular attack, DeFi attacks gain the upper hand in terms of volume over the same period. CipherTrace also notes that the funds stolen from KuCoin partially passed through Uniswap , which therefore links this attack to DeFi.

What conclusion to draw ?

Unsurprisingly, the analysis firm concludes that the anti-money laundering measures of DeFi protocols are „deficient“. CipherTrace explains as follows:

“DeFi protocols are permissionless by nature, which means they often lack a compliance tool. Anyone in any country can access it with almost no KYC information. As a result, DeFi can easily become a haven for money laundering . „

CipherTrace is historically anti-anonymity and pro-regulation, so this interpretation is not very surprising. It’s a debate as old as Bitcoin, which regularly agitates the crypto community. The creation of decentralized financial systems often allow more anonymity and funds that pass without control from s classic regulators .

Should this be seen as a good thing, and as a way for users to regain control of their capital? Or should we be concerned about the opportunities this presents to malicious actors? The debate is open…