Funds Lost to DeFi Hacks More Than Doubled to $1.3B in 2021: Certik

Centralization is the most common vulnerability, the security firm said.

AccessTimeIconJan 13, 2022 at 10:35 a.m. UTC
Updated Jan 13, 2022 at 3:21 p.m. UTC

Eliza Gkritsi is CoinDesk's crypto mining reporter based in Asia.

The amount of money lost in hacks of decentralized financed (DeFi) projects more than doubled to $1.3 billion in 2021, with centralization the most common vulnerability, Certik said in its inaugural "State of DeFi Security" research report.

  • While the value lost climbed 160%, the amount was a smaller proportion of the total than in 2020 due to growth of the DeFi market, the security firm said in the report released on Wednesday. As a proportion of the crypto market's capitalization, losses dropped by 17%, according to the report.
  • The total value locked (TVL) in DeFi protocols at the end of 2021 was $243.88 billion, up from $18.29 billion the year before, according to DefiLlama data. That means the lost funds shrank to 0.5% of TVL last year from 2.78% in 2020.
  • Centralization was the most common vulnerability "by far," the security firm said. Certik found 286 discrete centralization risks through the 1,737 projects it audited, including privileged ownership. For example, some projects were drained when hackers obtained private keys that gave them complete control of smart contracts. This likely would have been avoided using multi-signature wallets or decentralized autonomous organizations (DAO) instead of one or a set of private keys.
  • The second-most common vulnerability was missing event emissions, followed by use of an unlocked compiler version, code lacking proper input validation and reliance on third parties. An event emission is information produced by a smart contract when it is executed.
  • The report also found that Ethereum surpassed the Bitcoin network on fee revenue. It now generates more than 64 times Bitcoin's revenue and four times the number of daily transactions. But Ethereum also suffered from its success because high transaction fees sent users to other platforms.
  • Certik noted the rise of Ethereum alternatives such as Binance Smart Chain. Binance's layer 1 protocol had TVL rise 31,000% to $21 billion, Certik said.
  • The security firm raised $80 million in a Series B2 fundraising in December 2021, bringing its valuation to $1 billion.

CORRECTION (Jan. 13 10:47 UTC): Corrects proportion of market cap in first bullet point.


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Eliza Gkritsi is CoinDesk's crypto mining reporter based in Asia.

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Eliza Gkritsi is CoinDesk's crypto mining reporter based in Asia.

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