As of 2021, Compound Finance is merely the latest target of DeFi hacking activities. On September 30th, a problem in Proposal 062’s token distribution led to the exposure of a security hole, in which users were incorrectly given COMP tokens worth between $70 million and $85 million.
However, a few days later, an additional $65 million was stored in the same vault, putting at least $150 million in COMP tokens in jeopardy. While Compound was able to fix everything, the incident highlights the fragility of the DeFi sector at this early stage.
Only 5% of DeFi’s current value of $255 billion was locked in a year ago, when the TVL was $15 billion. An increase of 1,686% is represented by the shift. Even though the Compound mess happened and the decentralized trading platform BXH lost $139 million in an attack because an admin key was leaked, TVL has gone up by 14.27% in the last month.
To achieve better profits, several financiers have turned to DeFi protocols. Without a clear way for rates to go up by 2020, investors had to look elsewhere to protect their money. Since the profits on crypto assets locked to DeFi protocols are higher than those on other services, this strategy gained traction. Because of this, the agricultural yield went up a lot in 2020 and has kept going up every year since then.
The growing interest in DeFi has both good and bad effects on the cryptocurrency industry as a whole as it grows. Since 2012, Chinese cybersecurity company Slow Mist says there have been 534 hackings of blockchains, with 169 of them happening in 2021 alone. In recent years, hacking attempts have become increasingly sophisticated and widespread.
But in 2021, a hacker nobody knew attacked the cross-chain protocol Poly Network and did a lot of damage. This hack resulted in $610 million worth of tokens being stolen, surpassing the losses of MtGox and Coincheck combined. Roughly $273 million was stolen from the Ethereum network, $85 million was stolen in USD Coin from the Polygon network, and $253 million was stolen from the Binance Smart Chain. Large quantities of wrapped Bitcoin (wBTC) and wrapped Ether were also removed.