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The decentralized finance (DeFi) industry has lost over a billion dollars to hackers in the past couple of months, and the situation seems to be spiraling out of control.
According to the latest statistics, approximately $1.6 billion in cryptocurrencies was stolen from DeFi platforms in the first quarter of 2022. Furthermore, over 90% of all pilfered crypto is from hacked DeFi protocols.
These figures highlight a dire situation that is likely to persist over the long term if ignored.
In recent years, hackers have ramped up operations targeting DeFi systems. One primary reason as to why these groups are drawn to the sector is the sheer amount of funds that decentralized finance platforms hold. Top DeFi platforms process billions of dollars in transactions each month. As such, the rewards are high for hackers who are able to carry out successful attacks.
The fact that most DeFi protocol codes are open source also makes them even more prone to cybersecurity threats
This is because open source programs are available for scrutiny by the public and can be audited by anyone with an internet connection. As such, they are easily scoured for exploits. This inherent property allows hackers to analyze DeFi applications for integrity issues and plan heists in advance.
Some DeFi developers have also contributed to the situation by deliberately disregarding platform security audit reports published by certified cybersecurity firms. Some development teams also launch DeFi projects without subjecting them to extensive security analysis. This increases the probability of coding defects.
Another dent in the armor when it comes to DeFi security is the interconnectivity of ecosystems. DeFi platforms are typically interconnected using cross-bridges, which bolster convenience and versatility.
While cross-bridges provide enhanced user experience, these crucial snippets of code connect huge networks of distributed ledgers with varying levels of security. This multiplex configuration allows DeFi hackers to harness the capabilities of multiple platforms to amplify attacks on certain platforms. It also allows them to quickly transfer ill-gotten funds across multiple decentralized networks seamlessly.
Besides the aforementioned risks, DeFi platforms are also prone to insider sabotage.
Hackers are using a wide range of techniques to infiltrate vulnerable DeFi perimeter systems.
Security breaches are a common occurrence in the DeFi sector. According to the 2022 Chainalysis report, approximately 35% of all stolen crypto in the past two years is attributed to security breaches.
Many of them occur due to faulty code. Hackers usually dedicate significant resources to finding systemic coding errors that allow them to carry out these types of attacks and typically utilize advanced bug tracker tools to aid them in this.
Another common tactic used by threat actors to seek out vulnerable platforms is tracking down networks with unpatched security issues that have already been exposed but yet to be implemented.
Hackers behind the recent Wormhole DeFi hack attack that led to the loss of about $325 million in digital tokens are reported to have used this strategy. An analysis of code commits revealed that a vulnerability patch uploaded to the platform’s GitHub repository was exploited before the patch was deployed.
The mistake enabled the intruders to forge a system signature that allowed the minting of 120,000 Wrapped Ether (wETH) coins valued at $325 million. The hackers then sold the wETH for about $250 million in Ether (ETH). The exchanged Ethereum coins were derived from the platform’s settlement reserves, thereby leading to losses.
The Wormhole service acts as a bridge between chains. It allows users to spend deposited cryptocurrencies in wrapped tokens across chains. This is accomplished by minting Wormhole-wrapped tokens, which alleviate the need to swap or convert the deposited coins directly. - cointelegraph.
