Veritas Protocol: DeFi Security Improves While CeFi Breaches Soar in 2024

In 2024, the decentralized finance (DeFi) sector has seen a significant improvement in security, with a 40% reduction in financial losses compared to the previous year. This positive trend contrasts sharply with the centralized finance (CeFi) sector, which has experienced a dramatic surge in breaches, resulting in losses exceeding $694 million. The findings, detailed in Hacken's annual Web3 Security Report, highlight the evolving landscape of cryptocurrency security and the critical vulnerabilities that still exist.

Key Takeaways

DeFi losses decreased by 40%, from $787 million in 2023 to $474 million in 2024.
CeFi losses more than doubled, reaching $694 million, primarily due to access control vulnerabilities.
Major hacks in CeFi included the DMM Exchange and WazirX, leading to significant financial thefts.
Access control vulnerabilities accounted for nearly half of all DeFi losses, emphasizing the need for improved security measures.

DeFi Security Enhancements

The Hacken report indicates that DeFi has made substantial strides in security, largely due to the implementation of advanced protocols and cryptographic measures. Key improvements include:

Robust Bridges: The reduction in bridge-related exploits has been notable, with losses dropping from $338 million in 2023 to just $114 million in 2024.
Advanced Cryptographic Techniques: Innovations such as multiparty computation (MPC) and zero-knowledge proofs (ZKPs) have bolstered security.

Despite these advancements, challenges remain. Access control vulnerabilities still account for a significant portion of DeFi losses, exemplified by the $55 million hack of Radiant Capital, where attackers exploited weaknesses in transaction approvals.

CeFi Breaches on the Rise

In stark contrast to DeFi's progress, the CeFi sector has faced a troubling increase in security breaches. The report highlights:

Dramatic Losses: CeFi losses surged from $339 million in 2023 to $694 million in 2024, more than doubling in just one year.
Major Incidents: Notable hacks include the DMM Exchange, which lost approximately $305 million, and WazirX, which suffered a loss of $230 million due to compromised private keys and multisignature vulnerabilities.

These incidents underscore the critical gaps in CeFi's operational security, as highlighted by Dyma Budorin, co-founder and CEO of Hacken. He emphasized the need for better private key management and more robust security protocols to mitigate risks.

Lessons Learned and Future Outlook

The contrasting fortunes of DeFi and CeFi in 2024 present valuable lessons for both sectors. Key takeaways include:

Adopting Stricter Security Measures: Both sectors must prioritize enhanced security protocols to protect against evolving threats.
Focus on Key Management: Implementing stricter key management practices and automated monitoring systems is essential to reduce vulnerabilities.
Awareness of Threats: The report also highlights the ongoing threat from organized hacking groups, including North Korean hackers, who have stolen over $1.3 billion in crypto assets this year alone.

As the cryptocurrency landscape continues to evolve, the need for robust security measures remains paramount. Both DeFi and CeFi must learn from these incidents to build a safer financial ecosystem for all users.