In response to a recent spate of attacks on several key DeFi platforms on Sunday, which saw $70 million stolen in total, DeFi lenders began pulling funds out of other DeFi platforms including Aave, spiking borrowing fees across the specialized financial subsector. White-hat hackers were able to remove assets from a few lending pools on Curve to prevent their theft, and three out of the five total malicious attacks were apparently “front run” by MEV experts. Chainlink, the on-chain data provider, is also receiving some praise for preventing sector-wide collateral damage in the attack.
The nature of the attacks is apparently rooted in vulnerabilities found in a programming language called Vyper used specifically to launch smart contracts on Ethereum. Hacks in the world of crypto are not exactly like hacks elsewhere, as it’s increasingly common for attackers to return stolen funds, which are traceable on the blockchain. Security audit firm CertiK claimed that crypto users have lost at least $303 million from exploits in July 2020 alone.
In light of this recent black eye for DeFi, the recent talk about the future of DEXes, which would essentially use off-chain mechanics to execute trades, may be an outsized risk. As “The Chopping Block” podcast discussed, crypto traders have demonstrated that they would often be willing to trade in some of the assurances of fully on-chain crypto for better prices, faster transactions or just a leg-up. However, considering that even on-chain trade execution can apparently go so wrong, it seems like an outsized risk to take out the only benefit that blockchain brings to commerce: immutability and transparency.
Quotes: “In response, DeFi lenders began pulling funds out of other DeFi platforms including Aave, spiking borrowing fees across the specialized financial subsector,” “Hacks in the world of crypto are not exactly like hacks elsewhere,” “Crypto traders have also demonstrated that they would often be willing to trade in some of the assurances of fully on-chain crypto for better prices, faster transactions or just a leg-up.”