DeFi Exploit Losses Drop Below $1B in 2024 as Security Measures Improve

Losses from exploits in decentralized finance (DeFi) have decreased in 2024, with reported losses hovering just around $1 billion. This is a marked improvement

Losses from exploits in decentralized finance (DeFi) have decreased in 2024, with reported losses hovering just around $1 billion. This is a marked improvement over previous years, when the industry faced numerous breaches.

With only $1 billion lost to exploits this year, 2024 is on track to see a significant decline in DeFi-related losses compared to previous years.

Data on “Value Lost to Exploits (Excluding Terra)” from July 2020 to October 2024 shows changes in crypto asset losses, with theft activities increasing through 2021 and 2022. The reduced exploit-related losses in 2024 suggest that security improvements in DeFi protocols are working, with recent losses falling below $250 million.

An analysis of DeFi exploit losses over time reveals that since July 2020, the crypto market has experienced losses due to DeFi exploits. The largest spike occurred in April 2021, with losses exceeding $2.5 billion, primarily driven by weaknesses in mechanism design.

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From January 2022 to October 2022, there were additional surges, particularly in January, April, and October, with losses ranging between $500 million and $1 billion. However, by October 2024, reported losses were below $250 million, likely due to improved risk management and security infrastructure within DeFi.

The Terra/Luna Crisis: A Unique Case

It is important to note that the Terra/Luna crisis, unlike other exploit-related losses, resulted in a massive loss of over $50 billion. This incident was unique and involved the collapse of the TerraUSD (UST) stablecoin and its associated token LUNA, both of which were caused by flaws in their mechanism design.

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Although some believed the event was triggered by an economic attack, the UST’s de-peg was largely attributed to poor design practices. The event had a significant impact on DeFi, affecting over 25% of its total value locked (TVL) and reducing trust in algorithmic stablecoins.

In April 2021, over $2.5 billion in loss was driven by mechanism design issues, with additional difficulties in price control and private key management. Throughout the period analyzed, price manipulation, governance attacks, and smart contract bugs remained common exploit vectors, with smart contract vulnerabilities causing significant losses from mid-2023 onward. Rug-pulls occurred in some periods, but they were less frequent than other exploit types.

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