The security technology of DeFi projects has significantly improved in 2024, as reflected in the sharp decrease in the number of hacks and the amount of money stolen.
DeFi Security Advances, CeFi Faces Rising Challenges in 2024
The annual Web3 Security Report by blockchain security firm Hacken reveals a significant reduction in financial losses within the DeFi sector, decreasing from $787 million in 2023 to $474 million in 2024. This marks a 40% decline in losses year-over-year, showcasing notable improvements in DeFi security.
Financial losses due to hacks or exploits targeting DeFi bridges over the past three years. Source: Hacken
Key Highlights in DeFi Security
This progress can be attributed to safer protocols, enhanced bridge designs, and the adoption of advanced security measures such as multiparty computation and zero-knowledge proofs. Particularly, attacks on DeFi bridges—a previously critical vulnerability—saw a dramatic reduction, with losses dropping from $338 million in 2023 to $114 million in 2024.
However, challenges persist. Access control vulnerabilities remain a major issue, accounting for nearly half of all losses. One notable example is the Radiant Capital hack, which resulted in $55 million in losses due to mismanagement of access controls.
Comparison of financial losses between DeFi and CeFi over the past three years. Source: Hacken
CeFi: A Rising Target for Hackers
While DeFi is becoming more secure, centralized finance (CeFi) experienced a challenging year. Financial losses in CeFi more than doubled, rising from $310 million in 2023 to $694 million in 2024.
High-profile incidents, such as the Q2 hack of DMM and the Q3 breach of WazirX, exposed critical flaws in CeFi systems. These attacks targeted private key theft and exploited weaknesses in multisignature (multisig) configurations, causing damages of $305 million and $230 million, respectively.
Hackers exploit vulnerabilities in multisig mechanisms to seize assets. Source: Coindesk.
According to Dyma Budorin, CEO of Hacken, the primary vulnerabilities in CeFi stem from poor private key management, weak multisig configurations, and centralized systems. These "critical gaps" make CeFi an easy target for cyberattacks.
North Korean Hackers and Broader Implications
Cybersecurity risks extend across the broader Web3 ecosystem. North Korean hackers were linked to 47 attacks in 2024, resulting in over $1.3 billion in damages, as reported by Chainalysis on December 19.
Future Outlook
The stark contrast in financial losses between DeFi and CeFi in 2024 highlights opportunities for both sectors to enhance security. Budorin recommends implementing stricter key management practices and integrating automated monitoring systems to mitigate risks.
Ultimately, whether in DeFi or CeFi, robust cybersecurity measures remain crucial to safeguarding digital assets in the rapidly evolving blockchain landscape.
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