The word Rekt is a shortening of the word “Wrecked”, which refers to a huge loss. Initially, it was a word only used in the gaming world. Recently, Rekt is mainly used in the world of cryptos.
We say that we are rekt when we have lost a large sum of money on an investment. We also talk about rekt when we invest in a crypto that completely collapses or when we have been the victim of a scam like Rug PullEg.
The prodigious feats achieved by DeFi in recent years are counted in hundreds of billions of US dollars. Its failures are far from achieving this performance, but their evaluation sounds the alarm. This year alone, $1,4 billion was stolen by cyberattacks. The cause is none other than the increasingly noticed weakness of security protocols. This sad observation raises a fundamental question focused on the future of DeFi in terms of contract security.
A loss of around 1,4 billion since January 2021 on DeFi
Since its expansion in 2019, the Defi has been the scene of numerous cyberattacks with disastrous consequences for certain investors. The 2021 results are chilling: $1,4 billion. While the inadequacies of 2020 protocols like BZX had been fixed, hackers still found flaws to exploit. This is the work of hackers, you might say.
And this year, their efforts really paid off. The investigation I conducted revealed that bZx was not the only one to suffer the full brunt of cybercriminals' attacks. Its congeners such as Poly Network, Cream Finance and Uranium Finance, to name just a few, were also severely attacked.
The threats particularly attack their security vulnerabilities linked to private key design algorithms. And despite the close collaboration of programmers, hackers still manage to introduce viruses. Nothing therefore seems to guarantee the perfection of the system in the coming years. Will there always be this cat and mouse race?
Part of the money is recovered but the psychosis remains
In the news on DeFi in 2021, it should be noted that $760 million was returned out of $1,4 billion stolen. But is it enough?
Even more, in the end, should we be alarmed by the lost 1,4 billion? Is this really an astronomical sum?
Let's notice that many nations like the Comoros Islands have a much lower GDP. So losing such a sum can cause a certain instability in DeFi. With such financial power, the entire world of cryptocurrency would be threatened. But let's not look that far ahead. Let's not be so negative. Let's keep in mind that so far, the stolen funds have not been fully preserved. All the same, those responsible for blockchains like Binance SmartChain for example are on alert, and know that they are very exposed to potential rekt.
And yet, the funds accumulated by this operation have considerable value. It would therefore be important to put a flea in the ear of all the players in this universe, so that better security rules are put in place...
The Flash Loan: a formidable attack that hurts
According to a report published by theblock, the Flash Loan attack remains to date the most effective for rekt.
A flash loan proceeds by loan contracted during transactions without the imposition of a fee. It is in reality a powerful device that provides access to funds managed by the targeted protocol. This is how many algorithms distort their analysis, and fail to uncover the deception. Hackers therefore obtain the private keys and trace them back to the resources. And there you have it, the attack is complete! All that remains is to declare yourself rekt….
The flash loan is especially formidable in the face of protocols that have been developed in haste. Because it is common for DeFi managers to set up insecure algorithms, in order to quickly launch their services.
Some are in such a hurry that they don't even do an audit...
Are there blockchains that are spared from attacks?
It seems that all blockchains supported by DeFi have been victims of high-level hackers. No one is safe apparently… According to the newspaper theblock, the 2021 report shows 70 attacks :
- 34 perpetrated on the Ethereum blockchain
- 25 made on Binance Smart Chain
- 3 on Polygon
- And 2 on the blockchain Avalanche
Already in 2020, investors on the Binance Smart Chain reported the hacking of the bZx protocol. And in 2021, the EasyFi protocol suffered the same disgrace after its private keys were stolen by hackers.
Polynetwork: the most affected protocol in 2021 and the most publicized
If 2020 was marked by the recurring attacks suffered by bZx, 2021 witnessed the largest loss of funds made on Polynetwork. The amount lost was $611 million. Fortunately, the anxiety was very short-lived. The hacker voluntarily resolved to return the money to the platform, which in return rewarded him with $500. This story is very emblematic of rekt and "ethical" hacking in some ways.
The hacker managed to show the internal flaws in the code and Polynetwork has now succeeded in improving its code. An incredible story for those who followed it…
Conclusion on DeFi attacks and Rekt
DeFi has paid a heavy price since January 2021 with repeated cyberattacks which have caused it considerable losses.
With the Polynetwork affair, we realize that in the end, this can be very positive. DeFi recovered a good portion of the stolen funds. Likewise, now, audits are regularly carried out to avoid flaws in the code.
The pirate game is a game of cat and mouse whether in traditional finance or in decentralized finance.
Hackers make it possible to further secure the system as a whole, paradoxically…
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