Risks of DeFi hacks can magnify as we head into 2022, here’s why

DeFi has been one of the fastest-growing segments in the crypto space this year. The space has also garnered the interest of bad actors, naturally leading to close to 200 DeFi hacks throughout the year. But, some industry advisors are only expecting it to grow bigger in 2022.

Just yesterday, crypto trading platform AscendEX (formerly Bitmax) lost $77.7 million in a hack after its hot wallet was reportedly compromised.

Now, earlier today, Vulcan Forged announced that 96 private keys were stolen from its crypto gaming ecosystem leading to close to $140 million in losses.

While Vulcan Forged claims to have returned half of the funds to the affected users, the rest of the stolen tokens have been isolated.

But, looks like that is not it. Qredo’s Benjamin Whitby recently opined that,

“Next year will see the world’s first billion-dollar hack as DeFi activity continues to increase.”

Having said that, the Union Bank of the Philippines is meanwhile dealing with another hacking report at the time of writing.

Investor protection

In a recent post, IOHK recommended investors do their own research to protect themselves from possible DeFi risks. The company backing Cardano added,

“Researching means more than scrolling through search results or watching your favorite YouTuber talk about moonshots or chart patterns.”

IOHK further added that it is the responsibility of each DApp developer to “ensure that their application produces the correct results.”

However, the lack of regulations remains a major concern. SEC Commissioner Caroline A Crenshaw recently commented that many DeFi offerings and products closely resemble products and functions in the traditional financial marketplace. But, as per Hong Kong’s securities regulator, DeFi is difficult to regulate as it is rapidly transforming, unlike traditional finance.

Andy Meehan, chief compliance officer for Asia-Pacific at Gemini told SCMP,

“There needs to be a general global agreement on what DeFi is and what mechanisms make the most sense for regulating the industry. But the answer is certainly not to apply existing frameworks designed to regulate the traditional financial industry to DeFi.”

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