Opinion: DeFi attack stems from "centralization of rights" and is a pain in growth, not a "knell"

Whether you like it or hate it, the topic of decentralized finance (DeFi) has been sweeping the cryptocurrency space lately. By using smart contracts on the blockchain, DeFi applications can provide loans and a variety of other financial services without the need for a trusted third party.


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Only code is needed to ensure that these operations are valid, and recently Decentralized Finance (DeFi) has been hailed as one of the biggest use cases for smart contracts and DLT. Although Ethereum has dominated most of DeFi, Bitcoin may not be behind.

The smart contract platform RSK recently announced Token Bridge, an interoperability agreement between Bitcoin-linked sidechains and Ethereum. This development may have a significant impact on the future direction of DeFi. "People are paying more and more attention to Bitcoin today," said Richard Ma, CEO and co-founder of smart contract auditing firm Quantstamp.

Ma recently talked about a potential attack vector for DeFi and the importance of unlicensed financing.

After the recent bZx and Lightning loan theft incidents, showing how primitive and old these systems are in resisting arbitrage and performing complex transactions, these products are still alive today-which is impossible under the traditional financial system.

Although Lightning Loans are seen as the root cause of bZx "attacks," like some other theoretical attacks on governance, Ma explained that many of these attacks may actually be achieved without Lightning Loans.

"The difference is that the level of competition between those with millions of dollars in assets and those without assets has now become equal."

Ma then emphasized that due to the low liquidity of the mixer and the strict enforcement of KYC by most exchanges, it is generally difficult to use this money to take advantage of this arbitrage opportunity until the emergence of lightning loans.

"Now, Lightning Loan makes these arbitrage more meaningful because you can use someone else's money to attack the project, and in the end, you return their money. So it has nothing to do with you," he said, adding That said, the only anonymous part is the proceeds of the event.

Ma also said that one of the main attack vectors that projects and users have overlooked is denial of service (DoS) attacks, a new variant of the attack that could weaken the field of unlicensed financial services in the future. He believes that these attacks "are essentially caused by concentration of power."

bZx incident causes damage to DeFi industry, but DeFi will not stop

Nevertheless, the bZx attack incident did not unexpectedly have some impact on the DeFi industry. After the last bZx attack, the scale of the locked-in assets of the DeFi industry has experienced a significant loss, which is about $ 140 million lower than the peak of $ 1.2 billion on February 18. Just a few weeks before the attack, DeFi's total assets locked in reached a landmark $ 1 billion. According to data from analysis site Defipulse.com, this attack reduced the amount of locked ETH, reducing the total by about 200,000 ETH.


Nonetheless, analyst Kistner did not consider these vulnerabilities as a death knell for DeFi. Instead, he said that this is only part of the development of the ecosystem:

"Even NASA cannot hire all the people who write the perfect code to launch the space shuttle. They have adopted a rigorous process throughout the code development cycle. We need to treat the launch of the DeFi DApp like a space shuttle."

There are many variables that need to be resolved before DeFi applications gain mainstream adoption, but it is fair to say that this is a step in the right direction. With countless people tied up by traditional banking systems, decentralized finance is providing a way for millions of people around the world to provide financial services.

As the $ 1 billion locked in DeFi continues to grow, and more decentralized financial projects begin to develop, this may be the next frontier of the cryptocurrency industry.