Crypto world on edge after string of hacks with $3.2 billion stolen from DeFi projects

2 months ago 50

NEW YORK - Not long after dropping out of college to pursue a career in cryptocurrencies, Ben Weintraub woke up to some bad news.

Mr Weintraub and two classmates from the University of Chicago had spent the past few months working on a software platform called Beanstalk, which offered a stablecoin, a type of cryptocurrency with a fixed value of US$1. To their surprise, Beanstalk became an overnight sensation, attracting crypto speculators who viewed it as an exciting contribution to the experimental field of decentralised finance, or DeFi.

Then it collapsed. In April, a hacker exploited a flaw in Beanstalk's design to steal more than US$180 million (S$258 million) from users, one of a series of thefts this year targeting DeFi ventures.

Hackers have terrorised the crypto industry for years, stealing Bitcoin from online wallets and raiding the exchanges where investors buy and sell digital currencies. But the rapid proliferation of DeFi start-ups like Beanstalk has given rise to a new type of threat.

These loosely regulated ventures allow people to borrow, lend and conduct other transactions without banks or brokers, relying instead on a system governed by code. Using DeFi software, investors can take out loans without revealing their identities or even undergoing a credit check. As the market surged last year, the emerging sector was hailed as the future of finance, a democratic alternative to Wall Street that would give amateur traders access to more capital. Crypto users entrusted roughly US$100 billion in virtual currency to hundreds of DeFi projects. But some of the software was built on faulty code.

This year, US$2.2 billion (S3.2 billion) in cryptocurrency has been stolen from DeFi projects, according to the crypto tracking firm Chainalysis, putting the overall industry on pace for its worst year of hacking losses.

Many of the thefts have stemmed from flaws in the computer programs - known as "smart contracts" - that power DeFi. The programs are often built hastily. And because smart contracts use open-source code, which provides a publicly viewable map of the software, hackers have been able to orchestrate attacks on the digital infrastructure itself, rather than simply infiltrating someone's account. It's the difference between robbing an individual and emptying an entire bank vault.

"DeFi has introduce...

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