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The decentralized finance (DeFi) sector continues to attract increasing attention from crypto investors. ForkLog has gathered the most important events and news of the last weeks into a
The decentralized finance (DeFi) sector continues to attract increasing attention from crypto investors. ForkLog has gathered the most important events and news of the last weeks into a summary.
The amount of blocked funds (TVL) in DeFi protocols increased to $60 billion, while MakerDAO was the leader with $8.51 billion, while Lido ($7.63 billion) and AAVE ($6.58 billion) took the second and third places, respectively.
TVL rises to $35.17 billion in Ethereum applications In the last 30 days, the indicator has decreased by 6% (the value was $37.29 billion on August 10).
The decentralized exchange (DEX) trading volume in the last 30 days was $53.1 billion.
Uniswap continues to dominate the non-custodial foreign exchange market, which accounts for 63.9% of the total turnover. In terms of trading volume, the second is the DEX Curve (13.1%), the third is DODO (8.2%).
With the increasing capitalization of the cryptocurrency market, the DeFi sector may pose long-term risks to financial stability. This was stated by experts from the research group of the US Federal Reserve System (FRS).
According to analysts, the threat is related to the lack of clear rules for regulating decentralized applications. In a published study, they noted that the industry has not yet become “systematically important,” but that government departments should pay more attention to it.
“The rapid growth of the role of blockchains indicates that policymakers need to start thinking seriously about all the financial stability issues that may arise if such activities become systematically important,” the document says.
The Fed stressed that regulators do not have the necessary tools to enforce the laws and regulations in DeFi. According to experts, industry players “will seize any lucrative opportunity, regardless of supervisors’ fears.”
The Fed also published a separate study on the impact of digital assets on financial stability. Analysts noted the need for tighter control over crypto companies working with client funds.
“Surveillance when needed, comprehensive disclosure, and capital and liquidity requirements can increase organizations’ resilience in the digital asset ecosystem. For example, central entities that act as counterparties to retail users often do not have capital, liquidity or comprehensive disclosure requirements.
According to analysts, the cryptocurrency industry is “prone to accumulating financial vulnerabilities.” However, the Fed described the risks to economic stability as “small”. This is due to the limited relevance of digital assets to the traditional market.
“These risks could quickly become significant if the digital financial system becomes more connected to the traditional one or expands the scope of financial services,” they added.
The US Federal Bureau of Investigation (FBI) has issued a warning about the most common vulnerabilities used by cybercriminals to attack DeFi platforms.
According to a report by analytics firm Chainalysis, between January and March 2022, cybercriminals stole $1.3 billion in cryptocurrencies. Almost 97% of these are stolen from DeFi platforms.
The FBI has identified three common tactics to attack this segment of the crypto market:
“Cybercriminals want to capitalize on the increased investor interest in cryptocurrencies, as well as the cross-chain functionality and sophistication of open-source DeFi platforms,” the agency said.
Blockchain security companies state that the most dangerous vulnerabilities are related to the negotiation of smart contracts.
“Smart contract code often cannot be changed to fix security flaws. The Ethereum Foundation said assets stolen from smart contracts cannot be recovered and are extremely difficult to trace.
The FBI recommends scrutinizing DeFi platforms, protocols and smart contracts for independent auditing and assessing the potential risks of investing in this segment.
Rune Christensen, co-founder of DeFi platform MakerDAO, says free-floating DAI is the only path to decentralization and compliance.
He noted that since September 11, 2001, financial regulations have shifted towards zero tolerance for instruments that authorities cannot control. Christensen added that recent events such as Terra, Celsius and others have undermined trust in digital currencies and DeFi.
“Physical reprisals against the crypto industry can occur without prior notice and the possibility of recovery, even for law-abiding innocent users,” he said.
According to him, this violates the underlying assumptions underlying asset risk-weighted (RWA) assessment to support the DAI stablecoin and makes the “authoritarian threat” too serious.
Christensen believes Maker cannot create a blacklist, so the platform does not comply with it.
“The only option is to limit the attack surface by reducing the effect of RWA to the maximum fixed percentage of the total collateral. This requires free movement from USD,” the founder of MakerDAO concluded.
According to Christensen, two main tools will help provide a solution: MetaDAO and Protocol Owned Vault.
Profitable DAI farming through MetaDAO will enable users to accept a floating coin against the dollar. Christensen said the resulting reward tokens will drive the supply of DAI through decentralized supply.
The Protocol Owned Vault allows the platform to earn negative DAI target rates and set a cap.
At the time of writing, 51% of Maker’s stablecoin supply is backed by USDC. The total value of the funds blocked on the platform is $9.26 billion.
Solana-backed DeFi protocol team OptiFi accidentally shut down its mainnet and locked $661,000 of user funds in USDC.
According to the developers, the error occurred during the protocol code update. The process took longer than expected, possibly due to Solana’s overload.
As a result, they canceled the installation, but only after an intermediate broker account was created. The developers used the faded program shutdown command in an attempt to remove the buffer account.
“It turns out that we don’t fully understand the impact and risk of this command line here. Solana program shutdown, in fact, aims to permanently close the program and return SOL tokens from the buffer account used by the program to the recipient’s wallet, ”the OptiFi team explained.
The developers have made sure that they will reimburse users with all funds.
They also said they learned a lesson from the incident and are considering moving on, among others:
Richard Patel, developer of Jump Crypto’s Firedancer Solana client, has found a fix that will help prevent similar incidents in the future and possibly return locked OptiFi funds.
Decentralized loan platform credit It has closed its $11.25 million Series A funding round led by Early Stage Motive Partners and ParaFi Capital.
Funding was also provided by Valor Capital Group, Abra, MGG Bayhawk Fund, Victory Park Capital, Circle Ventures and other investors.
The funds raised will be used to expand operations in Latin America.
DeFi platform Nereus Finance Based on Avalanche, it was arbitrated with a flash loan of $51 million. According to CertiK, the hacker’s loot was approximately 370,000 USDC.
The attacker manipulated the prices of AVAX tokens on Nereus using borrowed funds. After the arbitrage process was completed and the loan was repaid, approximately 370,000 USDC remained at the address.
The attacker then transferred funds from the Avalanche blockchain to Ethereum. It held 194 ETH (~$310,000) and 15,850 DAI at a matching address in the network of the second largest cryptocurrency by capitalization.
The hacker sent most of the ether to addresses of the FixedFloat platform for digital asset exchange in four transactions of 45 ETH. At the time of writing, all 12.7 ETH and 15,850 DAI are left in the Ethereum wallet.
Hackers hacked the front end of an unattended exchange KyberSwap DeFi project Kyber Network. Damage to users amounted to 265,000 USDC.
On September 1, KyberSwap developers detected suspicious activity at the front-end level. After closing the interface for investigation, they discovered malicious code in the Google Tag Manager (GTM) tool.
The exploit placed a false confirmation for the transaction and allowed hackers to withdraw the user’s funds to their address.
Less than two hours later, the team relaunched the interface and removed the malicious code from GTM.
The attack affected two addresses. The developers assured that the victims will receive full compensation. According to them, the attackers were targeting the whales’ wallets.
The KyberSwap team identified hacker addresses on the Ethereum and Polygon networks and contacted various exchanges to monitor and block the movement of stolen assets.
According to PeckShield, the attackers withdrew the first tools for the attack from the central BitMart platform.
KyberSwap suggested that the hackers contact them and return the stolen funds at 15% of the amount.
Binance CEO Changpeng Zhao said that the Bitcoin exchange security team found two suspects in the attack and relayed the information from KyberSwap to their colleagues. Now the company coordinates its actions with law enforcement.
On September 6, Kyber Network developers talked about eliminating the attack vector in the KyberSwap DEX and compensating $265,000 USDC in damage.
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Source: Fork Log
I’m Sandra Torres, a passionate journalist and content creator. My specialty lies in covering the latest gadgets, trends and tech news for Div Bracket. With over 5 years of experience as a professional writer, I have built up an impressive portfolio of published works that showcase my expertise in this field.
