• Crypto funding shifted from CeFi to DeFi in 2022, with investments into DeFi projects up 190% and investments in CeFi projects down 73%.
• February saw seven DeFi exploits resulting in a net loss of around $21 million.
• The DeFi market had a bearish past week, with most of the tokens trading in the red due to the new federal budget and Fed rate hike.
Shift from CeFi to DeFi
In 2022, investment firms poured $2.7 billion into decentralized finance (DeFi) projects – an increase of 190% from 2021 – while investment into centralized finance (CeFI) projects fell 73%, totalling $4.3 billion for that same time period. This shift towards DeFi is likely due to its high growth potential as well as multiple collapses within the CeFI sector during that year.
Exploits Resulting in Losses
February saw seven DeFi protocol hacks resulting in a net loss of roughly $21 million. These included reentrancy, price oracle attacks, and exploits across seven protocols. The largest instance was a flash loan reentrancy attack on Value Defi which resulted in over $11 million being stolen.
DeFi Market Bearish Last Week
The past week saw most tokens traded among the top 100 list performing poorly due to drops within the broader financial market as well as a new federal budget and Fed rate hike announced recently. This caused most tokens on this list to be traded at a lower price than before.
Tornado Cash Version Aimed at Regulators
Tornado Cash developers announced plans for a version 2 of their mixing tool which would be more compliant with regulations, allowing law enforcement agents to differentiate between legal and illegal transfers of funds using this platform.
Overall, it is clear that investors are increasingly turning towards decentralized finance options after multiple CeFI collapses throughout 2022. This shift has seen an increase of nearly 200% in investments towards such projects since then despite overall crypto funding figures decreasing by almost 40%. Despite some major losses incurred via exploits during February, progress is being made towards making these platforms more compliant with regulations set by authorities such as law enforcement agents and governments worldwide – setting the stage for future growth within this industry sector