It’s absolutely essential that we, as humans, remain committed to moving forward. We often make the mistake of deeming this as a choice, but it’s actually our biggest necessity. You see, if we refuse to invest our time and resources in scaling up on continuous basis, we would get instantly pitted against the prospect of stagnating, and such a possibility has proven to be more devastating than any preconceived notion. Hence, with lessons from the past in our bag, we are always striving to find bigger and better avenues for growth. While we have come across many interesting things during these explorations, one that pretty much beats all of them by a mile is technology. Technology didn’t appear on the scene as just another tool. Right from the jump, it was vying to walk a road that no one had ever dared to set a foot upon, and the results rewarded this courage in the most fitting way. Now, even though technology literally altered our lives for the better, it also brought some glaring flaws into the picture. One area where these flaws made their presence felt was of regulatory industry. As an expansive digital realm made it easier for the rule breakers to bypass regulations, the scenario directly translated to an endless struggle for the regulators in terms of establishing firm governance. So far, the said struggle has produced many by-products in its wake, and one more seems to have joined the pack in recent days.
According to a report put-together by Elliptic, DeFi fraud and theft incidents have reached record a high in 2021, as aggregate losses for users and investors cross $12 billion mark. The report finds ill-designed technology to be responsible for a slice worth $10 billion in the total figure, whereas exit scams and theft of admin keys accounted for losses over $1 billion. When talking about structural issues around decentralized apps, the finger was aimed mainly at potential errors made during designing and developmental stages.
“The DeFi ecosystem is an incredibly exciting and fast-moving space, with financial services innovation happening at light speed. This is attracting large amounts of capital to projects that are not always robust or well-tested. Criminal actors have seen the opportunity to exploit this,” said Tom Robinson, Chief Scientist at Elliptic.
Apart from the statistical findings, SEC Commissioner, Caroline Crenshaw has previously diagnosed lack of transparency in the DeFi system as one of the biggest things holding the idea back. With its entire setup located on blockchains, DeFi has every bit of potential to become a financial alternative to traditional banks in the future, but for that to happen, it must fix certain issues right away.
