In August, thieves exploited a coding issue to drain $190 million from a company called Nomad. An epic crash this spring erased nearly $1 trillion and forced several high-profile companies into bankruptcy. The breaches have shaken faith in DeFi during a grim period for the crypto industry. “It’s putting a lot of pressure on the space and restricting the innovation that’s possible.” “DeFi has introduced a whole other level for hackers to be able to access a platform,” said Erin Plante, vice president of investigations at Chainalysis. It’s the difference between robbing an individual and emptying an entire bank vault. And because smart contracts use open-source code, which provides a publicly viewable map of the software, hackers have been able to orchestrate attacks on the digital infrastructure itself, rather than simply infiltrating someone’s account. Many of the thefts have stemmed from flaws in the computer programs - known as “smart contracts” - that power DeFi. This year, $2.2 billion in cryptocurrency has been stolen from DeFi projects, according to the crypto tracking firm Chainalysis, putting the overall industry on a pace for its worst year of hacking losses.
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Crypto users entrusted roughly $100 billion in virtual currency to hundreds of DeFi projects.īut some of the software was built on faulty code. As the market surged last year, the emerging sector was hailed as the future of finance, a democratic alternative to Wall Street that would give amateur traders access to more capital. Using DeFi software, investors can take out loans without revealing their identities or even undergoing a credit check. These loosely regulated ventures allow people to borrow, lend and conduct other transactions without banks or brokers, relying instead on a system governed by code. But the rapid proliferation of DeFi start-ups like Beanstalk has given rise to a new type of threat. Hackers have terrorized the crypto industry for years, stealing Bitcoin from online wallets and raiding the exchanges where investors buy and sell digital currencies. Weintraub, 24, was home for Passover in Montclair, N.J.
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In April, a hacker exploited a flaw in Beanstalk’s design to steal more than $180 million from users, one of a series of thefts this year targeting DeFi ventures. To their surprise, Beanstalk became an overnight sensation, attracting crypto speculators who viewed it as an exciting contribution to the experimental field of decentralized finance, or DeFi. Weintraub and two classmates from the University of Chicago had spent the past few months working on a software platform called Beanstalk, which offered a stablecoin, a type of cryptocurrency with a fixed value of $1.
Not long after dropping out of college to pursue a career in cryptocurrencies, Ben Weintraub woke up to some bad news.
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