Crypto data analysis company Elliptic revealed that funds worth billions of dollars have leaked from decentralized finance (DeFi) protocols in 2021 alone. As capital inflows accelerate into the DeFi protocols, users are increasingly suffering from cases of theft and fraud, leading to a loss of $10.5 billion YTD.
As per the latest findings, total assets deposited on DeFi have increased more than 17 times over the past year to reach $ 247 billion. In addition, the number of losses due to theft rapidly rose from $1.5 billion in 2020 to a 600% increase of $10.5 billion in 2021.
Explaining the cause, Tom Robinson, Chief Scientist at Elliptic, noted:
“The DeFi ecosystem is an incredibly exciting and fast-moving space, with financial services innovation happening at light speed. This is attracting large amounts of capital to projects that are not always robust or well-tested. Criminal actors have seen the opportunity to exploit this.”
The study noted that the relative “untested and immature nature of the technology” has served hackers an advantage to steal the funds. In addition, DeFi’s liquidity pools have also made it easier for criminals to launder money and theft.
Elliptic divided the losses into two types: one that relates to direct losses due to hack and fraud, and another that suggests indirect losses arising due to depreciation of the market value of the DeFi asset due to thefts.
In 2021, a total of $12 billion was lost, including a direct loss of $2 billion and an indirect loss of $10 billion. Of the direct loss, funds worth $721 million were later recovered.
Since DeFi is mostly built on top of the Ethereum blockchain, the majority of the funds ($8.6 billion) were lost in Dapps using the Ethereum chain. Binance Smart Chain came second after reporting a loss of $2.5 billion.
