Welcome to Finance Redefined, your weekly dose of essential decentralized finance (DeFi) news – a newsletter designed to bring you significant developments over the past week.
DeFi has become a top choice for investors following the collapse of several centralized finance (CeFi) throughout 2022. Some key areas of interest for investors include “NFTfi”, on-chain derivative platforms, decentralized stablecoins and Ethereum Layer 2s.
February saw seven DeFi exploits resulting in a net loss of around $21 million. Mars is no different, with several exploits already recorded, such as on the Hedera mainnet. DeFi lender Tender.fi was exploited, but the white hat hacker who drained $1.59 million returned the funds.
The developers of Tornado Cash said a new version of the mixing tool would aim to be more regulator-friendly, where law enforcement can differentiate between legal and illegal transfer of funds.
The DeFi market had a bearish last week, with most of the top 100 tokens trading in the red thanks to the new federal budget and the Fed’s rate hike.
Crypto Funding Switches From CeFi To DeFi After Major Collapses: CoinGecko
Digital asset investment firms invested $2.7 billion in decentralized finance projects in 2022 – up 190% from 2021 – while investments in centralized finance projects went into the another direction – dropping 73% to $4.3 billion over the same period. The staggering increase in DeFi funding came despite overall crypto funding figures dropping from $31.92 billion in 2021 to $18.25 billion in 2022.
According to a March 1 report from CoinGecko, citing data from DefiLlama, the numbers “potentially point to DeFi as the new high-growth area for the crypto industry.” The report indicates that the decrease in funding for the CeFi could indicate that the sector “reaches a degree of saturation”.
7 DeFi protocol hacks in February, with $21 million in funds stolen: DefiLlama
Reentrancy, price oracle attacks and exploits on seven protocols caused the DeFi space to bleed at least $21 million in crypto in February.
According to DeFi data analytics platform DefiLlama, one of the biggest of the month was the flash loan reentry attack on Platypus Finance, resulting in an $8.5 million loss of funds.
DeFi Lender Tender.fi Suffers Exploit – Hacker Returns Funds
An ethical hacker drained $1.59 million from DeFi lending platform Tender.fi, leading the service to suspend borrowing while it attempted to recover its assets.
Web3-focused smart contract auditor CertiK and blockchain analyst Lookonchain reported an exploit that saw funds drained from the DeFi lending protocol on March 7. Tender.fi confirmed the incident on Twitter, citing “an unusual amount of borrowing” through the protocol.
Hedera confirms that a mainnet exploit led to the theft of service tokens
Hedera, the company behind the distributed ledger technology, Hedera Hashgraph, has confirmed a smart contract exploit on the Hedera mainnet that led to the theft of several liquidity pool tokens.
Hedera said the attacker was targeting liquidity pool tokens on decentralized exchanges (DEX) that derived their code from Uniswap v2 on Ethereum, transferred for use on the Hedera token service.
Tornado Cash developer says crypto mixer ‘sequel’ aims to be compatible with regulators
A former Tornado Cash developer claims to be building a new cryptomixer service to address a “critical flaw” in the sanctioned cryptomixer, hoping to convince US regulators to reconsider its stance on privacy mixers.
The code for a new Ethereum-based mixer, “Privacy Pools”, was released on GitHub on March 5 by its creator, Ameen Soleimani.
In a 22-part Twitter thread, Soleimani explained that the “critical flaw” of Tornado Cash is that users cannot prove they are not associated with North Korea’s Lazarus Group or a criminal enterprise.
DeFi Market Overview
Analytical data reveals that the total market value of DeFi fell below $45 billion last week. Data from Cointelegraph Markets Pro and TradingView shows that the top 100 DeFi tokens by market capitalization had a bearish week, with most tokens trading red except for a few.
Thanks for reading our roundup of this week’s most impactful DeFi developments. Join us next Friday for more stories, ideas and education in this dynamically evolving space.