What Poly Network Hack Reveals About DeFi

Soon

  • Poly Network interoperability protocol was violated Tuesday for more than $ 600 million.
  • attack brought back many of the concerns plaguing the nascent DeFi industry.
  • In the absence of an insurance product, many experts argue that these problems will persist.

One of the many promises decentralized finance proponents make with DeFi is that it is building a reprehensible financial system, incapable of being shut down or shut down by any entity.

Bad outbreaks that followed the record-breaking Poly Network hack may raise serious questions about the reliability of those promises.

Poly Network is an interoperability protocol that connects multiple blockchains that fall under the umbrella of DeFi, a generic term used to describe a collection of financial products that facilitate the lending, lending and trading of crypto assets without the need for third-party intermediaries. .

In a tweet on August 10, the team behind the multi-chain crypto project claimed that the network was “attacked.” Binance Chain, Ethereum, And Polygon. »

Important notice: We are sorry to announce that #PolyNetwork was attacked @BinanceChain @ethereum AND @ 0xPolygon resources were transferred to the following hacker addresses: ETH: 0xC8a65Fadf0e0dDAf421F28FEAb69Bf6E2E589963BSC286E2E589963BSC286A0D01c03c07e75e75D65E33c0D0D01c

– Poly Network (@ PolyNetwork2) August 10, 2021

Once the dust settled, it became clear that the attacker had fled with around $ 600 million in various cryptocurrencies. This makes the Poly Network hack the biggest exploit in cryptocurrency history, surpassing even the infamous Mt. Gox hack of 2014.

Although the largest, Poly Network is far from the first significant breach in DeFi – it has been a particularly bad year for the DeFi industry.

A published report from CipherTrace, just before the Poly Network exploit occurred, found that DeFi-related attacks increased by 270% in 2021 alone. industry had already lost $ 474 million since the report was published, a figure that more than doubled in a few hours. .

Despite the rampant looting, some within the industry point out that the cryptocurrency industry, not to mention the nascent DeFi industry, is still in its infancy.

“As DeFi is in its infancy and has been in the limelight, of course these new designs have not been battle tested. In 10-20 years, the space would have matured and been less susceptible to these types of attacks, ”said Charles Storry, growth manager at crypto index provider Phuture. decipher.

Story, on the other hand, pointed his finger at it. In particular, the Poly Network team. “This is due to poor management and questionable security at the Poly Network,” he said.

Tuesday, security auditor BlockSec provided an explanation not yet verified: the theft could be due to “loss of private key” or “an error in the signing process of the Poly network that was abused to sign a preset message.”

At the moment, approximately $ 342 million of stolen funds have been returned, with the promise of more to come.

DeFi centralization issues

In addition to the simple security of the protocol, the hack also raises key questions about decentralized DeFi.

Just an hour after the Poly Network exploited, the stablecoin chief technology officer – provider Tether announced that $ 33 million in involved USDT had been frozen.

“[No problem]. Teamwork, ”said Paolo Ardoino of Tether. “Thanks for the warning. Tether is doing its part to help protect the community. “

Frozen in this sense means that the attacker’s USDT can no longer move or transfer tokens, substantially limiting their total payout. And in events like this, it may be the only solution to stop the transfer of funds.

“In contrast to the promises of DeFi, the best hope in such situations is centralized actors, namely the providers of law enforcement and stablecoins,” said Ingo Fiedler, co-founder of the Blockchain Research Lab (BLR). decipher.

Tether has frozen assets multiple times following similar attacks and exploits. In February this year, for example, the stablecoin provider froze $ 1.7 million that was stolen from the popular DeFi Yearn.Finance project.

Elsewhere, CEOs and founders of larger cryptocurrency exchanges, including OKEx, Huobi, and Binance announced their efforts to block funds that could pass through their platforms.

“We are aware of the [Poly Network] exploit [that] Happened today,” said Binance chief Chanpeng Zhao. ” Although no one controls BSC (or ETH), we are coordinating with all of our security partners to proactively assist. re are no guarantees. We will do what we can.

But when Circle, the company behind another popular stablecoin called USDC, did not respond and froze the USDC involved in the attack, members of the crypto community called for action.

“Binance and Circle need to explain why [$ 3 million] BUSD and [$ 26 million] USDC stolen by hackers does not freeze,” tweeted crypto-reporter Colin Wu. “This case of the largest amount of money in DeFi history could have a huge impact on trust and oversight.”

Also, this wouldn’t be the first time Circle has frozen assets. In July 2020, the company frozen USDC $ 10,000, citing “binding court orders that have adequate jurisdiction over the organization.”

se events, as well as the latest Poly Network exploit, serve as a reminder of a much higher demand for the cryptocurrency industry.

” Poly Network hack has once again demonstrated the risks involved in DeFi and probably makes people think a second before using DeFi products,” said Fiedler. He added that the need for more detailed controls and insurance is crucial to instilling confidence in these products.

Lennart Ante, a researcher at the Blockchain Research Lab and Fiedler’s colleague, echoed similar points.

“Numerous hacks in the area of ​​unregulated DeFi show that there is a large insurance market that has not yet been tapped,” he said. decipher.

Source link

moreRead also Travala.com presents FUN token payment for vacation reservations

Related Posts

© 2024 Cryptocoin Budisma.net