- Cross-chain protocol Poly Network suffered a $611 million hack on August 10, 2021.
- The hacker exploited cryptographic weaknesses on the DeFi platform to commit the largest theft in crypto history.
- DeFi hacks are becoming more commonplace while total crypto crime has dropped, according to crypto security firm CipherTrace.
DeFi hacks are rapidly becoming the mainstay of crypto crime, with significant hacks and thefts reported every few months. CipherTrace research reported that total crypto crime has fallen from $4.5 billion in 2019 to $1.9 billion in 2020, to just $681 million in the first seven months of 2021. The growth of DeFi has contributed to these falling fraud rates, but cybercriminals are now turning to hacking DeFi platforms instead.
DeFi protocols need to beef up their security, but this will be a long-term process because of the nascent state of the industry and the continuous rapid development of DeFi applications and technology. A rush of money into the DeFi space has also made it a more attractive target for criminals.
Here’s how to minimize your risk of falling victim to a DeFi hack:
- Never ask a hacker for money. Desperate and foolish users have been sending gifts and messages to the Poly Network hacker asking for a share of the stolen tokens. The hacker sent 13.37 ETH (worth about $42,000) to a wallet owner that warned them about Tether freezing their stolen funds. Transfers out of the hacker’s wallet make it more tedious for white hats and law enforcement to trace and recover funds, and you run the risk of being prosecuted as an accomplice or as a money launderer.
- Use separate wallet addresses for DeFi activity. Using a separate wallet address for each DeFi platform you engage with minimizes your exposure to a loss event if the platform is hacked. Don’t put all your tokens in the same wallet.
- Check your wallet approvals regularly. If you are no longer staking in a DeFi project, cancel the access rights for that project to your wallets.
- Explore options to engage with DeFi projects through a third party like a centralized exchange. A good centralized exchange can protect you from security risks on the DeFi platform will still giving you returns on your investment. Huobi Earn, for example, offers up to 20% APY on your deposits, and your funds in the Huobi exchange are also protected by more layers of security and service guarantees.
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