The underemphasized truth behind DeFi Hacks
Decentralized Finance has been under the spotlight for some time now. Many promising projects blossomed and even matured thanks to the liberty DeFi has brought into the finance world.
The change in Total Value Locked (TVL) is an excellent indicator of how fast DeFi space is growing. TVL includes all the coins deposited in all of the functions that all DeFi protocols offer, including staking, lending, and liquidity pools. For reference, TVL for all DeFi stands at a staggering $229.27b at the time of writing. Only a year ago, it was “only” $52,28b.
It is only natural this rapid growth in DeFi is attracting the attention of all manner of hackers and fraudsters. In fact, there have been several attacks resulting in the complete loss of funds. At the time of writing, there are a total of 83 DeFi exploits that have occurred, with lost funds amounting to a total of approximately $2.3 billion at the time of these exploits. Note that these are only publicly known cases. The real damage might be much higher.
But how does money get stolen from DeFi protocols? How do hackers get away with millions of dollars worth of crypto assets? The short answer is, smart contracts atop of which these protocols are built are flawed.
The long answer is:
- Human error factor when developing DeFi projects
When using DeFi platforms, it is important to take the human error factor into account. The increasing popularity of DeFi resulted in more developers jumping on the bandwagon and starting working on smart contracts without enough experience. Actually, even the most experienced and talented developers can make mistakes, after all, we are not machines. Combine this factor with tight deadlines and errors become inevitable. Such errors make good exploitable points for malicious actors to take advantage of.
- Bugs in smart contracts
DeFi projects are built on smart contracts and smart contracts work through interactions of different functions. When a function is called, it initiates the transaction. A buggy smart contract can lead to disaster if an ill-intentioned person- in other words, a hacker, exploits it by using faulty smart contracts’ functions to execute illegitimate transactions. There are several cases of smart contract bugs being exploited, one the most recent of which is the MonoX attack, which resulted in the theft of $31m worth of assets.
CoverCompared’s solution for DeFi projects & DeFi users
A DeFi insurance marketplace, CoverCompared aims to help users stay protected against all of the risks listed above. The concept of DeFi insurance has emerged as a result of the increase in DeFi hack attacks, yet the need for DeFi insurance is still not stressed enough within decentralized finance.
Studies suggest 98,13% of all crypto assets are uninsured, in other words, they are vulnerable to hacks.
CoverCompared is an insurance aggregator, helping DeFi users find the perfect insurance solution for their unique needs. Any crypto owner, trader, or anyone who uses DeFi protocols for any reason can easily compare and buy insurance using crypto from various providers for their assets. On top of that, CoverCompared relieves users of paying gas fees usually required in crypto transactions.
CoverCompared is the First DeFi insurance marketplace for the global crypto ecosystem. We aim to lower transactional and administrative costs of insurance policies and coverage while providing high-value, cost-effective insurance products bought using a host of cryptocurrencies.
Our platform will be connecting users with multinational insurance providers for all global insurance products such as crypto-related protection, health, life, and travel policies. The platform will include a frictionless insurance marketplace experience that incorporates next-generation blockchain technology and tokenized incentives.