Decentralized crypto asset systems are deliberately designed to be out of reach from governments, making them more difficult to regulate. This is often seen as a positive, but it carries risks as well.
A recent article in Bloomberg documents how lack of government regulation makes de-centralized prone to hackers, and makes it difficult to prosecute those hackers.
“Over the past weekend, the DeFi application Mango DAO agreed to let a self-proclaimed trader keep almost half of the $100 million in assets he seized in exchange for releasing the rest of the funds while promising no criminal prosecution. The technique used by the Mango exploiter has been tied to other high-profile attacks. Harvest Finance lost $34 million in 2020, while Beanstalk was hit for $182 million in April.”
Within the decentralized finance community, exploiting flaws in code to effectively steal money is a gray area, as the article from Bloomberg pointed out.
The decentralized finance world will need to sort this out if that technology is going to become widely adopted. A key component to this will be standardizing smart contracts, which will streamline DeFi payments while also keeping them secure. For more information on how smart contracts can ensure secure and transparent financial transactions in DeFi systems, you can read a recent whitepaper Mercator Advisory Group published here.
