DeFi and Cybersecurity: What Future Holds?

Decentralised finance is blockchain applications that cut out intermediaries from financial products and services like loans, savings and swaps. It has its rewards but also carries plenty of risks. DeFi fundamentally uses blockchain technology to unlock value that traditional finance cannot. Rather than trusting a middleman like a bank or a fintech firm with their money, people trust “the code”. DeFi is still in its early stages but has multiplied over the past couple of years. The sector currently has over $108 billion in digital assets flowing through various projects, according to data by DeFi Llama. Same time in 2020, that number was around $1 billion. Hackers have also caught on just as quickly. Chainalysis’s report showed that seven of the ten largest crypto thefts from January 2021 to March 2022 involved DeFi protocols. Just three targeted centralised exchanges. According to Chainalysis, more stolen funds flowed to DeFi platforms (51%) in 2021. Centralised exchanges were the top destination of stolen funds and fell out of favour of late, receiving less than 15% of the total. More centralised crypto exchanges now have anti-money laundering and KYC (Know Your Customer) processes, which threaten the anonymity of cybercriminals.

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