Tom Wilson

LONDON (Reuters – Fraud at decentralized finance platforms totalled $10.5 Billion so far in 2018, research has shown. It highlights the risk of cryptocurrencies, which are still unregulated and fast growing.

DeFi platforms, which allow users to borrow, lend and save in cryptocurrency, bypass traditional financial gatekeepers like banks. According to supporters, the technology allows for faster and cheaper access to financial services.

DeFi has witnessed a flood of cash this year. This is in line with the growing interest and popularity of cryptocurrencies. Investors who are facing low interest rates or even zero have been attracted to DeFi because of the high return on their savings.

However, the unregulated industry is seeing a boom in crime according to Elliptic (a London-based Blockchain Analytics firm). It found that users have lost more than $12 billion to crime on DeFi platforms, lending platforms, and exchanges, since 2020. The majority of these losses occurred in 2021.

Elliptic found that DeFi site criminals have the ability to use bugs and design flaws as a way to attack code. Additionally, deep liquidity allows criminals to hide little evidence while laundering proceeds from crime. The report added that frauds are quite common.

“Decentralised apps are designed to be trustless in that they eliminate any third-party control of users’ funds,” said Elliptic’s Tom Robinson. You must trust that there has not been a design or coding error that could cause funds to be lost by the protocol’s creators.

The majority of major DeFi platforms state that they employ external companies to help with security audits and to maintain keys and passwords to allow users to use secure wallets.

DeFi Platforms currently hold cryptocurrency valued at $86 Billion, up from $12 Billion a year earlier, according to DeFi Pulse sector tracker.

Major investors have also bet heavily on the growth of the sector, with Canadian pension fund Caisse de Dépôt et Placement du Québec last month taking part in a $400 million investment in major lending platform Celsius Network.

Poly Network at DeFi was the victim of a $610 Million crypto theft in August. This is one of the largest ever, though it was returned by the hacker almost all.