Cryptocurrency

FBI Issues an Alert Over Decentralized Finance Platforms

Stating that over 97% of crypto hacks have come from related DeFi platforms, according to data from Chainalysis.

Cryptocurrency

FBI Issues an Alert Over Decentralized Finance Platforms

Stating that over 97% of crypto hacks have come from related DeFi platforms, according to data from Chainalysis.

On Monday, August 29, The FBI issued a warning surrounding Decentralized Finance (DeFi) platforms, stating that over 97% of crypto hacks have originated from such platforms, according to data from Chainalysis.

The alert shared that cybercriminals are exploiting vulnerabilities in the smart contracts of many of these DeFi platforms and in doing so are able to steal investors’ funds — resulting in over $1.3 billion USD in crypto being stolen between January and March of 2022.

In an attempt to mitigate future instances, the Agency shared that investors who suspect criminal activity should contact the FBI through its Internet Crime Complaint Center or through a local FBI field office.

The report also highlighted a few major methods of theft including, flash loan exploits resulting in losses of $3 million USD, signature verification vulnerabilities that have resulted in over $320 million USD in losses, and crypto price pair exploitation that has resulted in over $35 million USD in losses.

Other advice issued to investors and would-be users of DeFi platforms included in-depth research of platforms, protocols, and smart contracts before investing any funds, as well as an overall awareness of involved risk. It also urged potential investors to be sure that the platform has conducted one or more code audits — a process in which the platform has independent auditors review its code for any vulnerabilities or weaknesses.

Additional advice to investors included being aware of DeFi investment pools with extremely limited timeframes to join and rapid deployment of smart contracts — as they are usually rugs.

The Agency also issued advisory to platforms, stating that they need to “institute real time analytics, monitoring, and rigorous testing of code in order to quickly identify vulnerabilities and respond to indicators of suspicious activity,” adding that they should also “develop and implement an incident response plan that includes alerting investors when smart contract exploitation, vulnerabilities, or other suspicious activity is detected.”

In what is still an emerging sector of the internet and a relatively new investment vehicle, DeFi applications should be met with skepticism and a massive amount of research before any funds are deployed. Another method of protecting yourself from potential exploits is using separate and dedicated hot wallets that are not connected to all of your funds, but only those you wish to deploy to the specific dapp.

With anyone being able to utilize open source code to create financial products, exploits disguised as golden opportunities are more common than ever, and users should look to be as cautious as possible.

In other news, Coinbase launches a voter registration tool to support “crypto-forward policymakers.”

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