According to reports, the decentralized trading environment has lost $265 million, an increase of around 225.4% from its 2022 level.

Two Exploits Cause a Loss of 49.6%

The analysis, titled Immunefi’s Crypto Losses in Q2 2023, reaffirmed the ongoing difficulties the cryptocurrency business faces, particularly the rising incidence of hackers.

The bug bounty and security services company declared in no uncertain terms that hackers were intensifying their efforts to extort illegal profits from the budding business, concentrating especially on the DeFi sub-sector.

According to the research, almost $265 million was stolen by hackers in 81 separate incidents during the second quarter of 2023.

Out of this, crypto scams became the most prevalent attack type, showing a startling 225.4% growth from the previous year.

Crypto scams alone were responsible for losses above $44.9 million in Q2 2023, compared to the $13,818,000 reported in Q2 2022.

18 unique incidents involved these hackers behaviors. In addition, there was a considerable year-over-year increase in the number of single events, which increased from 49 to 81 in Q2 2023, an increase of 11% over the course of the two quarters.

Hacks accounted for the biggest share of losses sustained by cryptocurrency businesses and individuals, accounting for 83.1% of thefts.

Contrarily, hackers, scams, and rug pulls as a group were responsible for 16.9% of the entire effect.

Insights into the cryptocurrency hacking scene were provided by Immunefi, which claimed that the Fintoch rug pull and Atomic Wallet us attacks were responsible for a 49.6% loss in total value.

The Lazarus Group, which has ties to North Korea, cleared more than $100 million from Atomic Wallet our platform as a result of a cryptocurrency breach.

However, the Fintoch tournament brought in roughly $31.6 million, bringing the combined total for the two events to just under $132 million.

For holding their digital assets over the DeFi protocol, investors were given 1% daily interest via the Fintoch platform.

While the centralized finance (CeFi) environment has also been the target of cybercriminals, DeFi has been a blatant bait for bad actors.

Exchanges for cryptocurrencies reported a net loss of $37 million, which was split among just two events.

Despite being small, it represents a significant advancement for the CeFi sector given that no cryptocurrency hacks were reported in Q2 2022.

Overall, the statistics are not that horrible. Losses due to DeFi are down 65.9% from the same time last year, while losses due to hacks are down 66.4%.

BNB and ETH: Chains with the Biggest Impacts

The most affected blockchain protocols were also discussed in the research.

With 76.5% of assets lost on-chain among the top three protocols, BNB Chain and Ethereum suffered the worst losses.

With 10 instances, or 12.1% of all losses reported across the chain, Arbitrum placed third-farthest, which is nonetheless concerning.

The remaining chains, including Optimism, Terra, Sui Network, and others, paid the 6.2% balance bill with single incidents, while Polygon and ZKSync each had two incidents.

Nevertheless, a portion of the stolen money has been found. Immunefi reports that about $10.4 million has so far been recovered, although this is still a little amount because it only accounts for about 3.9% of the stolen money.

The greatest sum retrieved in the shared snapshot is $5.5 million for the Deus Finance project. Atomic Wallet, meanwhile, has only been successful in recovering $1 million of the monies that were stolen.

Hackers have stolen $30 billion in cryptocurrency Since 2012

A recent study revealed that over $30 billion in Bitcoin has been stolen in 1,102 occurrences that were documented from 2012 to the present.

The top five most frequent hacks, according to the blockchain security company SlowMist, include contract weaknesses, rug pulls, flash loan assaults, frauds, and private key leaks.

The overall number of events included 85 NFT hacks, 217 ETH ecosystem attacks, 162 BNB ecosystem hacks, 118 exchange hacks, and 119 EOS ecosystem hacks.

The biggest significant losses over the past ten years totaled more than $10 billion in exchange losses.

The number of hacking incidents with losses over $1 billion peaked in the early 2010s and then increased from 2019 to 2021.

According to the report, security incidents have decreased in frequency somewhat since 2022.

Losses from cybercrime are still anticipated to rise

Black hat hackers continue to create novel and increasingly sophisticated ways to defraud organizations and people of their data, money, and identities despite strong security measures.

The cost of cybercrime is anticipated to increase globally, from $8.44 trillion in 2022 to $23.84 trillion over the next five years, according to Statista’s Cybersecurity Outlook.

This is a record number, and as more individuals become interested in the cryptocurrency market, consumers will need to exercise extra caution while disclosing their wallets and personal information to hackers.

The creator and CEO of Immunefi, Mitchell Amador, commented on the Crypto Losses report and emphasized the need for cryptocurrency investors to thoroughly investigate projects before engaging with them. This is a result of the more sophisticated techniques used by criminals.

DeFi is an alternative financial system that uses decentralized applications (dApps), smart contracts, and blockchain technology to deliver financial services in an open and transparent manner and without the need for reliable middlemen.

The nascent multi-chain DeFi ecosystem experienced a boom in attention and investment over the summer of 2020.

DeFi Llama claims that over the summer of 2020, the trade value locked (TVL) across all significant smart-contract-enabled blockchains increased by 5 times, from about $2 billion to over $10 billion, before continuing to soar further in 2021.

TVL stands for the currency locked in dApp smart contracts, which is cryptocurrency.

The larger DeFi ecosystem is still in a rut as summer 2023 gets started.

Since the catastrophic collapse of the Ponzi-esque Terra blockchain’s DeFi ecosystem last May, TVL across major chains has remained stalled below $100 billion.

While significant crypto industry catastrophes like the Terra collapse and FTX implosion last November are already in the past, it seems doubtful that this summer will see a recurrence of the excitement we saw towards DeFi in 2020.

Here are two important reasons why “DeFi Summer” Probably Will Not Return in 2023.

The SEC is on the Attack

The aggressive and litigious US Securities and Exchange Commission (SEC) is one of the main uncertainties that the Decentralised Finance sector must deal with.

As part of its efforts to bring the US crypto business into compliance, the SEC has been suing the sector nonstop this year.

The recent high-profile legal actions against Binance and Coinbase have drawn attention to the fact that centralized crypto businesses have been the focus up to this point.

However, despite being borderless, DeFi protocols continue to provide services to the general public in the US, putting them at risk of being targeted by the SEC. Many anticipate that DeFi will soon be in the firing line.

The SEC has previously designated a number of popular cryptocurrencies (including Polygon, Solana, BNB, Cosmos, and Cardano) that are powering blockchains with smart contracts as securities.

These cryptocurrencies’ developing DeFi ecosystems are in jeopardy of being subjected to stricter US restrictions.

Although Ethereum, the main DeFi blockchain, has not yet been formally classified as a security by the organization, SEC Chairman Gary Gensler has already stated that he believes it to be one.

The SEC may potentially attempt to compromise important USD stablecoins like USDT and USDC, which are essential to the DeFi ecosystem.

Investors interested in crypto may prefer US regulation-proof crypto investments like bitcoin, which the SEC has specifically stated it does not recognize as a security, due to the US regulatory uncertainties.

TradFi Yields Are High and Increasing

In contrast to the summer of 2020, investors can easily earn high returns by purchasing traditional finance (TradFi) asset classes like US government bonds in the summer of 2023, and these yields may even continue to climb.

In the wake of lockdowns brought on by the Covid-19 outbreak, central banks all over the world aggressively reduced interest rates to bolster the economy around the beginning of 2020.

Deposit rates at banks and the yields on government bonds fell.

On the other hand, we enter the summer of 2023 after more than a year of aggressive interest rate increases from the world’s three largest central banks, the Fed, BoE, and ECB, who have all been attempting to control the inflation that has been out of control.

Government bond and bank deposit yields are much higher now than they were in 2020, and they may continue to rise as central banks promise further rate increases.

For instance, an investor would earn a 4.7% annual return if they were to purchase US 2-year bonds today and keep them until maturity.

The return on a 2-year yield held to maturity at this point in 2020 was less than 0.2%.

Investors looking for higher return opportunities were a major driver of the 2020 DeFi summer.

There is significantly less incentive to look for DeFi yields now that the TradFi market is offering such alluring risk-free rates.

Future expansion for DeFi anticipated?

Before investing in DeFi, it is critical to understand the sector’s future growth potential. It would appear that there is plenty of room to grow to at least the levels obtained during the previous bull cycle if we look at the chart below showing DeFi’s tremendous climb during the 2021 DeFi Summer.

There is no certainty that the move will be replicated in the crypto markets, but it does imply that there was once a market interest in DeFi at these levels.