Global blockchain adoption and its inherent evolution into many other popular forms were quite anticipated. And surely, the disruptive technology seems to be living up to expectations on many notes. Some of these include newly evolved forms like decentralized finance (DeFi), Non-Fungible tokens (NFTs), SocialFi, as well as the recently ignited Web3 — a collection of which we herein refer to as emerging trends.
It is a common mistake, however, to abruptly conclude that DeFi, in particular, offers unreserved security to investors — a belief that relies solely on its decentralization feature. As this misconception spreads like wildfire, it becomes important, therefore, to support our claims with proof of actual events which are bringing the flaws of the system into the limelight.
A recent report by CNBC, for instance, states that, in 2021 alone, the amount of DeFi capitalization that sank into the deep waters swarming with hackers was valued at around 12 billion dollars and this figure is projected to grow exponentially in 2022. A significant percentage of these figures was recorded when the security platform, Poly network lost around 600 million dollars to the biggest crypto hacking event of all time. Subsequently, a few other popular DeFi protocols had their fair share of the bitter pill.
As we might expect, we are up by a few hundreds of millions in “DeFi-vulnerability-related theft” (DVRT) this year already! A major hack of a huge DeFi protocol in early February, though, underscores that the future of money comes with its own set of risks. Attackers targeting Wormhole, which offers a bridge between the Solana and Ethereum blockchains for cross-chain transactions, made off with $320 million in various cryptocurrencies. It’s the second-biggest known DeFi theft of all time.
In the light of several smart contracts penetration and the unauthorized backend intrusions recorded ‘almost every fortnight’ throughout 2021, it’s meaningful to abandon the conventional belief of DeFi’s automatic security and take steps into making sure that Defi protocols are truly secured.
True DeFi security is expensive and requires a meticulous process of audits. This is usually followed by a series of repeated testing based on extensive security parameters. Unfortunately, it’s easier for investors to put their hopes in decentralization, believing that the lack of a central authority and control surely decreases the risks of insider information, one of the most important causes of protocol hackings. This belief, however, encourages many to disregard the time, effort, and resources that acute DeFi security really requires.
To address security in DeFi protocols doesn’t come by default with smart contracts. The most successful and secure DeFi protocols have a team of highly skilled tech-savvy individuals constantly investing the required expertise, as well as dedicating enough time to the procedure. And apart from having an in-house tech team, reputable services aiming to optimize protocol security exist to add another layer of security outside of the team’s scope of control.
Lossless - Extra Protocol Security
Lossless creates a trusted and safe DeFi ecosystem with minimal to no losses from hacks, exploits, or social engineering. As a team of experienced engineers, finance professionals, as well as DeFi experts, and white-hat hackers, we are dedicated to making crypto investing accessible and safe.
The Core Protocol is practically designed to mitigate hacks and stimulate scam alerts, rendering the DeFi space as trustless as possible. It continues to promote the growth and improvement of its hack mitigation elements. These are bringing to life better security standards in the fast-growing DeFi space. At Lossless, we are establishing an environment where everyone could assign their money quickly with the smallest risk. Creating a safer space for everyone, we are aiming to increase the adoption of DeFi.
At its core, the Lossless protocol is a piece of code that token creators insert into their tokens. Integrating this code will enable Lossless to freeze any fraudulent transaction, which conforms to a set of fraud identification parameters.
Lossless works in an integrated technique to complete a set of efforts necessary to mitigate losses. This set proceeds with our code integration into the project smart contracts and edges with an alteration of funds if hacks were eventually reported. In between, are a complex structure of hack detection mechanisms by which our Core Protocol takes effective measures in protecting the project’s and its users’ funds.
Conclusion
It is quite easy for individuals with the right technical skills to establish new DeFi tokens and get them listed on exchanges. Since many DeFi projects don’t undergo regulatory procedures, they can get listed even without a proper code audit. Many investors, however, could likely have avoided losing funds to such scams if they’d stuck to DeFi projects that have undergone a public code audit — or if DEXes required code audits before listing tokens.
It is expected that more institutional participation in DeFi is a major outlook for 2022. However, a necessity for quality security protocols is needed to encourage institutional players to jump in. Analysis suggests that Institutions are anxious to deploy equity into the DeFi space but face countless barriers due to regulatory uncertainties, as well as lower than needed security standards currently existing within the space. This also includes the KYC/AML practices which pose great concerns to security laws.
About Lossless
Lossless is the world’s first DeFi hack mitigation tool for token creators. Apart from our known cyber security solutions and renowned professionals, the community also plays a role. With a tangible reward system, community members are also encouraged to explore new ways to detect hacks and fraudulent transactions.
Our protocol halts counterfeit transactions through various methods of fraud identification and automatically reverses any stolen tokens back to the original owner. Our solutions to the impending problems of cyber theft within the blockchain space are thorough and applicable within many protocols.
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