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Richard Ma, the CEO and co-founder of the blockchain security startup Quantstamp, explained that decentralized finance has the potential to change our financial ecosystem but security remains a huge challenge.
“We think security is very crucial for DeFi’s growth,” he said at the Unitize digital conference today. Ma noted the several DeFi hacks that occurred so far in 2020, stating that $26 million worth of funds were stolen from DeFi projects this year alone.
Rising interest in DeFi
The DeFi ecosystem grew almost three fold from $700 million in December 2019 to $2 billion at present. Reflecting on this growth, Ma said:
“It indicates a desire for an alternative financial system because as you see with COVID-19, banks are printing more and more money and interest rates that are available in the traditional financial system are quite low. So, people are looking for better options.”
He specifically noted the expansion of DeFi project Compound and said that almost $700 million has flown into DeFi projects to gain yields that are far more compared than those offered by the traditional financial system.
But security issues persist
According to Ma, while DeFi projects promise financial inclusion, better interest rates, and reduced costs, many are still lacking on the security front, with critical vulnerabilities for users’ funds.
Ma said that one of the largest attack vectors is through undercollateralized loans where hackers inflate the values of some assets temporarily and deposit them to a lending protocol and then borrow a different asset using the manipulated price.
As these projects are decentralized and there’s no way to track and restore illegal transactions, “it’s crucial to have proper security ahead of time.” Apart from security audits, focusing on live security monitoring, increased transparency, and insurance will be the way forward to increasing DeFi’s potential, Ma concluded.
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