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David Agullo

August 26, 2021

DeFi: Latest Front in Cryptocurrency hacking problems

Cryptocurrencies are on the hit list of various cyber heists over a long time. When we talk about the recent threat in cryptocurrency, peer-to-peer DeFi crypto platforms are at their peak. Poly Network is known as Decentralized Finance platform that enables transactions among peers to exchange the token across various blockchains.

Poly Network has been the target of $610 million in crypto theft last week, which is the biggest example. According to the Decentralized Finance platform, the white hat hacker returned almost all the funds within few days. The theft aims to expose the cyber vulnerabilities to improve Poly Network security. The unusual ending of the Poly Network proves the emerging risks in the cryptocurrencies that engage almost 80 billion. Numerous interviews with businessmen, lawyers, and analysts have been held on this issue.

DeFi sites facilitate the users to lend, borrow or exchange and store the cryptocurrencies bypassing traditional financial gateways like banks and exchange agencies. Its followers believe the technology offers inexpensive and efficient access to the financial services. But the robbery case of Poly Network throws light on the criminal susceptibilities of DeFi sites. Potential hackers can also expose the bugs in the open-source code to be used on different sites. The terms and conditions are still inadequate with no trust in victims.

Ross Middleton, CFO of DeFi Deversifi platform said the security burden on the major platforms like Coinbase Global has thrown out the less secure platforms. “What has happened is that the big exchanges have gotten really good (security-wise) and the smaller exchanges are not there anymore,” he said. “The frontier is certainly DeFi now.”

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Crypto intelligence firm Cipher Trace records hackers and fraudsters lift-off $472 million within 7 months that is January to July. This shows the crime rate on the DeFi sites has reached an all-time high. According to the DeFi experts, the security threats are more prone to the new sites that may work with less secure codes. To combat the growing security measures and the risk gaps, various untested protocols are to be emphasized by the governments to regulate the crypto industry.

Enforcement Action

The chairperson of the US security and exchange commission (SEC), Mr. Gary Gensler has indicated that he will take a hard-hitting attitude on DeFi to draft legislation to curb DeFi and crypto trading.

The SEC this month brought its first requirement activity including DeFi tech, charging the organization gave unregistered protections and deluded financial backers. The SEC didn’t react to further inquiries on its position.

Authorities at the US Commodity Futures Trading Commission have also signaled a more noteworthy investigation.

Magistrate Dan Berkovitz in June called DeFi a “Hobbesian commercial center” – a reference to a seventeenth-century philosopher who considered life to be government as “frightful, brutish and short”. Unlicensed DeFi platforms for subordinates were violating items exchanging laws, he proposed.

Somewhere else, moves are slower. DeFi is still far from the political plan in Britain, for example.

A representative for Britain’s monetary watchdog said while some DeFi actions might fall under its scope, a significant part of the sector is unregulated.

A few analysts recommend strict rules and regulations are inevitable for the DeFi sites to do their job efficiently in the future.