Decentralised Finance Surges with more hacks costing millions

The decentralised finance (De-Fi) sector is experiencing a resurgence with a total value now worth USD 55 Billion according to Coinmarketcap.

The driving force behind this growth is the spike in stablecoin borrowing rates. This surge in interest rates for borrowing stable coins like USDC and Tether showcases a growing demand for leveraging crypto currency positions and potential arbitrage opportunities.

While De-Fi is rallying and thriving in the current market environment it’s not all good news with more hacks reported such as the recent hack on TheStandard.io and serves as a reminder of the risks associated with the crypto sector.

With external factors such as global reserve banks continuing to raise interest rates to bring inflation under control, more people are looking to alternative financial services in order to land windfalls and cover debts. Or to create new income streams to cover the rising costs of living. While Crypto Currency can see some significant windfalls it is also a high risk, high stakes investment strategy.

De-Fi Back in Business

Interest rates for borrowing stablecoins have climbed significantly across various De-Fi lending services signalling a resurgence of interest in De-Fi. Aave, one of the leading De-Fi lending platforms has seen interest rates for stablecoins exceeding the 10% mark.

This spike suggests that traders are taking bigger risks and are more than happy to borrow at higher costs which in turn points toward an increase in the leveraging of crypto currency positions. This shift follows a period of slow growth when De-Fi lending returns were lower in comparison to the soaring interest rates offered by conventional bonds and saw significant investment by traders.

The rising activity in De-Fi lending is seen across the sector including in the crypto derivatives market particularly in perpetual futures trading. Data published by an analytics provider Coinglass shows that funding rates for contracts that speculate on the upward trends of tokens just like XRP have turned positive.

This movements indicates that traders are optimistic about crypto price increases are willing to pay those with a bearish stance to maintain their positions. XRP has also experienced a 14% increase in value recently alongside gains in other altcoins indicating Altcoin season has now commenced.

The increase seen in both De-Fi and the derivatives market aligns with the broader sentiment that Crypto winter is over and a rally in the crypto currency market is here. Bitcoin hasn’t disappointed either with the flagship crypto currency recording a whopping 26% increase in value in October alone. This mark is it’s most significant monthly upswing since the beginning of the year.

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These gains are fuelling expectations for future regulatory advancements notably the potential approval of Bitcoin exchange-traded funds (ETFs) by the US Securities and Exchange Commission (SEC) a milestone that is once met many believe will see Bitcoin become cemented into the mainstream and continue to thrive.

The Standard Gets Hacked

Despite the positive momentum in the De-Fi space it's essential to be aware of the inherent risks. TheStandard.io a De-Fi stable coin protocol recently fell victim to a hack that resulted in the loss of USD 264,000.

According to a report from blockchain security analyst CertiK the hacker exploited a low liquidity vulnerability in the PAXG pool on the Arbitrum network.

A low liquidity exploit is a type of attack where a threat actor takes advantage of pools with low liquidity to manipulate asset prices for financial gain. The hacker was able to target the PAXG liquidity pools and managed to steal 8,500 USDC and 280,000 Euro.

Following the attack the hacker used nearly €223,000 to mint an Algebra position NFT. Given the way NFT’s have gone in the past, we’re not too sure if this was a wise decision by the hacker or he was just trolling.
TheStandard.io has assured its customers that all collateral in the smart vaults remains safe. As a precaution.

The platform has temporarily paused the minting of new EUROs until the exploit is patched. The platform has also called on the attacker to come forward as a "white hat" and negotiate a deal.

This incident serves as a stark reminder of the rising threat of cybercriminals targeting small De-Fi and crypto projects for quick gains. In October alone crypto scams and hacks have cost users over USD 32 million.

Highlighting the importance of robust security measures in the crypto space. With De-Fi once again growing in popularity we can be sure that there will be more people out there willing to take risks to access locked funds.

So please be safe!

Image sources provided supplemented by Canva Pro Subscription. This is not financial advice and readers are advised to undertake their own research or seek professional financial services.

Posted Using InLeo Alpha