DeFi Security isn’t Just a Trend. It’s a Necessity For Everyone
The decentralized finance (DeFi) space has grown significantly over the past two years. Following the coronavirus pandemic, many people were forced to rely on DeFi protocols for access to financial services — especially since traditional finance firms appeared to have been overwhelmed. \ Currently, data from DeFi Pulse shows that the total volume locked in DeFi protocols stands at $95 billion. It’s a bit off from the all-time high of $112.5 billion, but it’s definitely more than the $32.9 billion held in protocols a year ago. \ There is already reason to believe that DeFi will grow even more in 2022. For one, blockchain platforms are already competing to become DeFi hubs, offering massive investments to incentivize developers to build and become more stable. At the same time, developers are also coming into the DeFi space in droves. \ Interestingly, security remains a major issue for DeFi protocols. Data shows that $10 billion was stolen from DeFi protocols in 2021. This is much more than the total volume of DeFi hacks in 2020, showing that the market still has a long way to go as far as security is concerned. \ While trends like non-fungible tokens (NFTs) and the metaverse are also becoming more popular, there is no doubt that the DeFi train isn’t stopping soon. In this piece, we get important insights from Lossless — a DeFi security and hack mitigation tool that is becoming more popular. \ The interview takes questions from Vygandas Masilionis and Domantas Pelaitis — the Chief Executive Officer and Chief Technology Officer at Lossless. What is your assessment of the DeFi space over the past two years, especially from a security standpoint? Vygandas: DeFi grew enormously in the matter of TVL, I just remember when in 2020 August only $7bn was locked and it looked like a lot. From that point, there were plenty of hacks/scams. The majority of them were because of lack of knowledge and rush because everyone was forking each other with the same bugs. Luckily, later on, people started not trusting easily forked projects and more projects started to take it seriously and do everything without rush — with more internal testings and audits. So the good news is that projects started to feel the need for security products/services in order to be safe and credible in the market. Usually, teams don’t have a security team and their OpSec is poor, so definitely security products will be used even more in the future. What do you think are the biggest threats facing the DeFi space currently? Vygandas: Attitude to security. Everyone is not thinking about that until they are hacked and lose money and we can see that almost $10bn was lost last year, so it means plenty of hacks and scams. People should consider security as a top priority because there is so much money locked in the protocols and hackers are targeting them all the time so when a team doesn’t have dedicated security teams it is hard to know all angles of attacks and how to protect from them. How does Lossless tie into the need for improved security? Vygandas: We want to be special forces for security matters for any projects because we are creating the whole infrastructure for the projects to be safe in DeFi space. Each project cannot think and know about the newest types of hacks etc. and we want to provide that information for them and solutions on how to be protected in this evolving industry. Our main goal is to take action and protect projects before the hack even occurs. What sets Lossless apart from other DeFi security solutions? Vygandas: Taking action — this is the main difference between us and the rest of the products in the market. Currently, the market is full of auditors, but they cannot ensure anything, and usually, they don’t have any liability in the case something happens for the audited smart contracts. \ Domantas: Also, we are working on solutions that would prevent hacks in the first place, one of such solutions is our Vault Protection tool. And we will continue working towards other prevention and mitigation solutions. This means that Lossless will be able to cover a variety of attack vectors. How do you expect to scale as more protocols and tools use your product? Domantas: The best part of Lossless is that it is fully permissionless. We are giving people a security framework that can be infinitely scaled from many different angles. Anyone can integrate our protection code into their token without us even knowing about it. And anyone will be able to report incidents without help from us. It’s an organic ecosystem of projects that need protection and hack finders that want to do some good and benefit from that. So in the end this benefits greatly from the network effect and scaling is not a problem, but a solution. Conclusion Heading into 2022, it is important that DeFi protocols and projects become more secure. These protocols’ customers will be counting on them to be better, and they need to make a lot of fixes to ensure proper compliance. \ Fortunately, tools like Lossless are available to make the work even easier. With a complete infrastructure that helps protocol developers to ensure optimal security, Lossless is taking the arduous work out of the entire process.