Reasons we should not neglect DeFi Security.
DeFi has exploded in popularity over the last few years, but sadly it has also become popular in the hackers’ community. With over $2 Billion in losses in 2022 alone, DeFi is now crypto crime’s main arena, threatening the industry’s progress and future.
2021 witnessed a notable shift of criminals targeting decentralized protocols. According to reports, crypto platforms have been hacked 20 times more often than centralized exchanges. Hackers risked 167 DeFi protocols and 123 centralized exchanges in the last decade. Losses amounted to over 4 Billion USD, while centralized exchanges accounted for $3.2 Billion in losses.
But what can be the reason behind the increasing DeFi attacks?
The unique features DeFi offers, such as privacy and anonymity, are obvious attractions to criminals. These characteristics help opportunists operate smoothly and make them difficult to track down. Without government oversight or third-party intervention, hackers can successfully integrate with real users and enter the system to execute their crimes.
Centralized exchanges have the advantage of added security from regulators and centralized bodies. However, DeFi is still in its infancy and faces a massive influx of premature projects with insufficient security protocols.
Main attack vectors in DeFi:
- Smart Contract Vulnerability
- Protocol or design flaw
- Wallet compromise
- Rug Pull, Exit Scams
- Key Leaks
- Frontend Hacks
- Cryptocurrency-related bugs
- Front runs
The most common attacks have been due to smart contract vulnerabilities and sophisticated attacks by threat actors.
What makes DeFi more vulnerable to crimes?
DeFi is a reasonably new technology, with engineers still trying to figure out the best practices to grow the industry securely. With all innovations and discoveries, there are challenges along the way, and the intersection between technology and security is one of the most common.
In addition, blockchains lack specific and well-revised regulations. Law enforcement in the DeFi space remains relatively unexplored as implementing regulation can compromise a chain’s decentralization. Finding a balance between regulation and decentralization can be tricky, but it is the only solution to enable the mass adoption of DeFi.
What is DeFi Security?
DeFi Security is a set of protocols for users to follow when engaging with DeFi Protocols, DEXes, or DApps. DeFi regulation is instrumental for security, but it must not be confused with that used for traditional or centralized finances.
Implementing traditional compliance with DeFi protocols can hamper the very essence of DeFi, and we must work toward a system that enhances its features. A blockchain must be made safe by preserving its decentralized qualities, anonymity, and privacy. Otherwise, it wouldn’t be DeFi.
Authorities must create specific laws targeting DeFi security, including some level of KYC and AML, our most powerful tools against financial crime. Personal details must never be accessible, and decentralized platforms could utilize compliance services to perform these tasks on their behalf to avoid disrupting their decentralized nature. DeFi security emphasizes user security and authentication with advanced technology and intervention from legal experts in a way that respects user privacy and decentralization. It is a solution that can take this innovation forward and establish it as a financial revolution.
DeFi Security by Astra Protocol
Astra Protocol is a compliance layer working toward making DeFi and Web3 safer, including KYC and AML capabilities for a decentralized ecosystem. Astra’s package ensures DeFi protocols and users comply with regulations that make the blockchain trustless, private and decentralized.
Astra Protocol is equipped with highly advanced technology and backed by legal experts from accredited firms worldwide, known as the Decentralized Legal Network (DLN). Astra’s DLN provides thorough on-chain audit services and allows optimized resolution of disputes with low business risks. Astra’s platform includes a set of rules that users or participants must follow before they entire the protocol or chain as a verification process — establishing user authentication and preventing actors, criminals, and bots from entering the network.
With unique solutions that promote DeFi, Astra Protocol comes with a promise to enhance user experience across the crypto industry and make DeFi the next big thing in the global financial infrastructure. To a safer and more secure future in DeFi with Astra Protocol.
Astra’s mission is to provide a range of regulatory compliance tools for crypto applications, ensuring that financial compliance standards can be met across the Web3 industry.
Astra — KYC for Web3