Despite recent concerns and setbacks floating around in the market, Decentralised Finance (DeFi) is far from dead. The issues and exploits that have arisen are growing pains of a new and evolving technology - what was once characterised by excessive liquidity and yield farming has matured into a more robust system, with decentralised platforms emerging as market leaders. Major corporations are showing interest, and the technology is attracting attention beyond traditional financial boundaries.
DeFi's transparency, efficiency, and innovation are setting new standards across the financial system. Its challenges are signs of growth, not failure, and the experiments being conducted are paving the way for a more decentralised and transparent financial future. The road may be bumpy, and mistakes are part of the learning process, but DeFi's potential is just coming to light. Far from dying, it promises to revolutionise how we understand and interact with finance, with Ethereum standing to benefit from this transformation!
Total Crypto Market Cap: $1.224T (-0.89%)
DeFi TVL: $44.06B (-5.91%)
Stablecoins: $124.49 (-2.45%)
In one of the biggest crypto exploits in DeFi history, hackers managed to drain the **cross-chain bridge Multichain** for $125 million this past June - and blockchain sleuths are pointing to an inside job! The unfolding of events within the Multichain organisation began on May 21, 2023, when its CEO, Zhaojun, was abruptly taken away by Chinese police from his home - typically a huge red flag in the crypto wild west. This incident led to a cascade of challenges and uncertainties for the global Multichain team.
Upon losing contact with Zhaojun, the team discovered that their operational access keys to MPC node servers had been revoked. These servers, it was later revealed, were running under Zhaojun's personal cloud server account! Further inquiries with Zhaojun's family unveiled that all of his personal devices, hardware wallets, and mnemonic phrases had been confiscated by the authorities. Even more concerning was the realisation that all operational funds and investments, previously under Zhaojun's sole control, were now in the hands of the police.
Figure 1 - Multichain’s TVL by DefiLlama.
Despite being thrust into this precarious situation, the team endeavoured to maintain project operations, cooperating fully with Zhaojun's family and adhering to local laws and regulations whilst also taking responsible steps to inform the community about the CEO’s disappearance and the technical hurdles they were facing.
Unfortunately, the situation took a more alarming turn on July 6, 2023, when Multichain experienced unusually large, unauthorised withdrawals in what appeared to be a hack or rug pull by insiders. The exploit resulted in losses of more than $125 million, making it one of the biggest crypto hacks on record. Assets taken included wrapped Ether (wETH), wrapped Bitcoin (wBTC), and USDC. The attacker also withdrew $666,000 from the Dogecoin bridge, resulting in a loss of 85% of total deposits, and $6.8 million from the Moonriver bridge, which included funds in USDC and Tether (USDT).
Figure 2 - Unauthorised withdrawals from Multichain by Chainalysis.