If DeFi doesn’t solve this problem, it will still face many obstacles in 2021

DeFi’s growth this year has been astounding, with the total value locked (TVL) in DeFi reaching the $1 billion mark at the beginning of the year. However, in the following nine months, DeFi’s TVL jumped to $13.5 billion .

Interestingly, the DeFi hype has decreased slightly over the past month, with many DeFi tokens falling off the charts in October, only to rise again in November on renewed bullish sentiment towards tokens like YFI and COMP.

However, while the DeFi story seems to be growing stronger and stronger in 2020, the dark side of the ecosystem seems to be growing simultaneously. According to a new report released by CipherTrace, the craze has also attracted criminal hackers to DeFi, resulting in the most DeFi hacks to date .

The report highlights that “in the first six months of 2020, 45% of all thefts were DeFi-related, equivalent to approximately $51.5 million, or 40% of the thefts during that period. So far in the second half of 2020, DeFi has accounted for 50% of all thefts , averaging approximately $47.7 million, or 14% of the thefts during the same period.”

Since the beginning of 2020, DeFi’s TVL has grown by as much as 700%, forming a disturbing parabola. In fact, the above findings are based on data from CipherTrace, which concluded that DeFi hacks accounted for 21% of hacks and thefts in 2020.

Although many people believe that the DeFi hype is over, the decentralized finance ecosystem remains one of the hot properties of the digital asset market. Although September and October saw a 50% drop for many projects such as YFI, UNI, COMP, UMA, etc., the situation is completely different for the above projects. The strong fundamentals of DeFi seem to have helped these tokens, allowing them to correct their downward trajectory in the second half of the year, especially in the first week of November.

According to a recent report from Longhash, “On September 1, when most DeFi tokens reached their peak in market price, DeFi’s TVL was $9.66 billion. Since then, despite a correction in DeFi token movements, the value locked in DeFi has actually increased .”

DeFi’s 2020 has certainly represented two sides of one coin, with the space attracting a lot of attention in 2020, while also raising concerns about Ethereum’s efficiency and capabilities in handling such high demand and activity.

With TVL growing 14x, the DeFi ecosystem appears to be setting new standards. However, bad actors in DeFi must be weeded out if it is to remain in a favorable position heading into 2021.

The report highlights the inherent conflicts in DeFi and the regulatory scrutiny it could attract if crime rates continue at the same level , so it is important to remain vigilant.

“ DEXs cannot freeze funds like centralized exchanges can, instead, this ability lies with the individual DeFi projects themselves. However, without adequate measures in place to ensure the security of the smart contracts that many DeFi projects rely on, DeFi may only continue to suffer the consequences of inadequate AML and security.”