This American institution warns of the dangers of DeFi

The smart contracts on which DeFi platforms operate are increasingly vulnerable to cybercriminals. They exploit loopholes that allow stealing investors’ cryptocurrencies. These vulnerabilities are relatively numerous, and preventing them is difficult. However, even this American institution that is the FBI tries to do prevention in this area where there is a certain insecurity.

The FBI and its findings around flaws in DeFi

Between January and March 2022, cybercriminals, more than 1.3 billion dollars were stolen in crypto-currencies. Of these 1.3 billion, 97% came directly from decentralized finance platforms according to data from Chainalysis. This represents a increase from 72% in 2021 and 30% in 2020.

The majority of hacks come from these DeFi instances:

  • The use of flash loan (instant loan) which triggers certain vulnerabilities
  • The exploitation of vulnerability in the field of Bridges allowing to send cryptocurrency from one blockchain to another.
  • The manipulation of the value of cryptocurrencies on the Oracles Blockchain

Of course, these risks represent the biggest hacks in the history of DeFi. Other forms of hacking such as rug pulls take place every day but with much lower consequences and amounts.

Recommendations for DeFi users and platforms

In order to prevent risks, the FBI recommends that investors:

  • Do their own research on protocols, platforms and contracts in order to be aware of the risks
  • Ensure that the platform has carried out one or more audits to limit security risks
  • To avoid liquidity pools with relatively short implementation times, in particular without the recommended code audit.
  • Be aware that open-source code also allows hackers to observe potential security vulnerabilities

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On the platform side, the FBI also makes some recommendations:

  • Implement real-time scanning and monitoring to identify vulnerabilities faster
  • Develop and implement an incident response plan

Moreover, the FBI encourages also investors who have had their crypto-currencies stolen to contact them. The objective of the approach is probably to follow the movements of the funds and why not, to recover them.

These FBI recommendations can make you smile and yet they should not be taken lightly. Users are regularly being siphoned off via DeFi protocols every day. Always remember to do your own research and only invest money that you are able to lose.

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