Introduction

There has been quite a stir in the cryptocurrency market ever since the proverbial “Big Bang” of decentralized finance, which made a major splash in the sector in late 2019. The use of the first swaps and decentralized finance under the mantle of Uniswap in 2019 gave rise to an entirely new direction in the practical use of cryptocurrencies.­­

Few veteran market participants would fail to recall the Hot DeFi Summer of 2020, which heated up with the launch of the Compound protocol and its COMP tokens. What followed was a true surge in DeFi activity, resulting in the release of such projects as Yearn Finance, YAM, Link, SushiSwap, and many others.

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Though DeFi is certainly an innovative industry that disrupts the financial market and is highly competitive compared to traditional finance, it still has numerous pitfalls. As a fragmented industry developed by countless project teams independently of one another, DeFi lacks any semblance of unification or compliance with nonexistent norms, legal forms, regulations, or even rules. This so-called Wild West mentality in decentralized space has resulted in significant losses for all involved.

If the first quarter of 2022 alone is to be taken as any indication, the period has seen a 695% increase in DeFi hacks. $320 million were lost by the Wormhole protocol, another $80 million by Qubit Finance, and others lost nearly as much. In total, about $1.3 billion were lost to exploits, hacks, security breaches of every kind imaginable, and banal disregard for basic personal information and administrative access panel security measures.

And thus, we come to a simple conclusion that can be drawn about the DeFi market as a whole on the basis of its fragmentation, poor security, and lack of unified rules – Decentralized Finance is not decentralized at all.