Welcome to Finance Redefined, your weekly dose of essential decentralized finance (DeFi) insights — a newsletter crafted to bring you the most significant developments from the past week.
The past week in DeFi was dominated by exploits and hacks, with three DeFi platforms losing nearly $39 million. Alphapo’s hot wallets were exploited for over $32 million, Era Lend was drained for $3.4 million, and the decentralized finance protocol Conic Finance was exploited for almost $3.5 million.
These security breaches had a negative impact on DeFi protocols, as the total value locked in DeFi protocols saw a significant drop over the past week.
In better news, the DeFi ecosystem was buzzing with developments in zero-knowledge-proof (ZK-proof) scaling solutions as the layer-2 sector heats up despite the bear market.
The first incident involved Alphapo, a crypto payment platform that had roughly $31 million drained from its Ether (ETH), TRON (TRX), and Bitcoin (BTC) hot wallets. Security experts reported the hack on July 22, and investigations are still ongoing. The funds stolen on the Ethereum network were then swapped for ETH before being bridged to the Avalanche and Bitcoin blockchains. The hack may have been caused by a leak of private keys.
Another hack occurred on the lending zkSync app, Era Lend, which was exploited for $3.4 million in crypto. The attacker used a “read-only reentrancy attack” to drain the funds. This attack interrupts a multistep process and then causes it to continue after a malicious action has been performed. The attacker manipulated a contract into reporting old values that had not yet been updated. Investigations are currently underway to determine the extent of the damage caused.
While these exploits were taking place, the development of zero-knowledge-proof (ZK-proof) technology was heating up in the DeFi ecosystem. ZK-proofs are cryptographic methods that allow one party to prove something is true to another party without revealing any sensitive underlying private information. This technology has become a hot topic of discussion among crypto veterans. At a recent event called zkDay, over 2,000 attendees gathered to learn about the latest ZK projects. The technology plays a critical role in powering layer-2 scaling solutions and enables private transactions without revealing sensitive information.
In other news, the Optimism network surpassed Arbitrum in transaction volume for the first time in six months. Both networks are Ethereum layer 2s that use optimistic rollup technology to lower transaction fees. This is significant because it shows the growing adoption of layer 2 solutions and their ability to handle high transaction volumes.
The overall DeFi market saw a bullish surge after three bearish weeks. Most tokens in the top 100 by market capitalization traded in the green, indicating positive market sentiment. However, the total value locked in DeFi protocols remained below $50 billion.
That’s all for this week’s summary of the most impactful DeFi developments. Join us next Friday for more stories, insights, and education regarding this dynamically advancing space.
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