Why is there so much skepticism around DeFi?

[passwordnow]

Exploits or hacks are the main reasons why there's a decrease in trust for DeFis. This chart alone which is only one from the article of chainalysis and there are others to show how many hacks have been for the past years in the DeFi sector. The source is also in the image I've provided.

[Abiky]

Exploits or hacks are the main reasons why there's a decrease in trust for DeFis. This chart alone which is only one from the article of chainalysis and there are others to show how many hacks have been for the past years in the DeFi sector. The source is also in the image I've provided.

Let's not forget that "De-Fi" platforms don't have any investor protections or guarantees of any kind. In other words, you're on your own. Not only hacks or exploits are a concern, but also the value of the underlying "De-Fi" protocol itself. If the value goes down, you will lose more money than what you earn. For this reason, centralized finance will remain dominant forever.

At least, "De-Fi" brings "banking to the unbanked". Assuming a "De-Fi" platform doesn't comply with KYC/AML standards (no ID/credit checks, etc). The whole point of "De-Fi" is to bring freedom and censorship-resistance to the masses. If they fail to do that, they are no different than centralized finance. Only time will tell us what will happen to this nascent industry. Just my two sats.

[passwordnow]

Exploits or hacks are the main reasons why there's a decrease in trust for DeFis. This chart alone which is only one from the article of chainalysis and there are others to show how many hacks have been for the past years in the DeFi sector. The source is also in the image I've provided.

Let's not forget that "De-Fi" platforms don't have any investor protections or guarantees of any kind. In other words, you're on your own. Not only hacks or exploits are a concern, but also the value of the underlying "De-Fi" protocol itself. If the value goes down, you will lose more money than what you earn. For this reason, centralized finance will remain dominant forever.

At least, "De-Fi" brings "banking to the unbanked". Assuming a "De-Fi" platform doesn't comply with KYC/AML standards (no ID/credit checks, etc). The whole point of "De-Fi" is to bring freedom and censorship-resistance to the masses. If they fail to do that, they are no different than centralized finance. Only time will tell us what will happen to this nascent industry. Just my two sats.

That's right, we are on our own with the DeFi platforms and that is it, there's no guarantee of being protected while our money is in them. Many have lost money with this thing and that's why those that have learned already from such don't ever want to be back from it. It's better to hold whatever you have than to put them into these platforms whether they're decentralized or centralized because you are on your own and there is no one to protect you. While the buzz word about having no kyc/aml or central authority is still being bought by many, that's the point there, you have to trust the platform and whatever they do. But you'll be worried at most times not knowing whether they are still there or probably have gone already.

[TastyChillySauce00]

Exploits or hacks are the main reasons why there's a decrease in trust for DeFis. This chart alone which is only one from the article of chainalysis and there are others to show how many hacks have been for the past years in the DeFi sector. The source is also in the image I've provided.

curious what the data for 2024, so far I've seen less hacking, maybe due to increased urge of auditing their deployed smart contract.
every projects out there always pay big money for audit these days and as a result security is improved, also partnership with big exchange to freeze the stolen fund and revert loss has been going pretty good as well.
though doesn't mean most of defi are immune to hack, at least there's an effort to prevent it from happening.

unlike back in the days when some random just deploy whatever solidity code they have without knowing the best practices.

[passwordnow]

Exploits or hacks are the main reasons why there's a decrease in trust for DeFis. This chart alone which is only one from the article of chainalysis and there are others to show how many hacks have been for the past years in the DeFi sector. The source is also in the image I've provided.

curious what the data for 2024, so far I've seen less hacking, maybe due to increased urge of auditing their deployed smart contract.
every projects out there always pay big money for audit these days and as a result security is improved, also partnership with big exchange to freeze the stolen fund and revert loss has been going pretty good as well.
though doesn't mean most of defi are immune to hack, at least there's an effort to prevent it from happening.

unlike back in the days when some random just deploy whatever solidity code they have without knowing the best practices.

That's what I think of for this year, lesser hacks but we can't be sure. Maybe the small time hacks weren't reported and so that won't count for the records and audits. I think that the damage has been made, even how the DeFi platforms are going to retain the confidence of their users, still the damage was there already. And it is hard to take back that trust from the majority.

There will still be some good percentages there and users that will be attracted to get back. But those that want to be sure, won't be taking that risk any longer.

[Abiky]

That's right, we are on our own with the DeFi platforms and that is it, there's no guarantee of being protected while our money is in them. Many have lost money with this thing and that's why those that have learned already from such don't ever want to be back from it. It's better to hold whatever you have than to put them into these platforms whether they're decentralized or centralized because you are on your own and there is no one to protect you. While the buzz word about having no kyc/aml or central authority is still being bought by many, that's the point there, you have to trust the platform and whatever they do. But you'll be worried at most times not knowing whether they are still there or probably have gone already.

I guess that's why most people prefer centralized finance than "De-Fi". It provides investor protections and guarantees for complete peace of mind. All in exchange of giving away your personal information (KYC). "De-Fi" provides greater privacy and freedom, but it's extremely-vulnerable against hacks, theft, and scams.

If you lose your money in a "De-Fi" platform, it will be gone forever. No way to get it back unless the creators/developers of the platform decide to remedy the situation. So there's that. Hopefully, people's perception of "De-Fi" will change in the future as developers beef up security. We're still in the early beginnings, anyways.

[o48o]

Let's not forget that "De-Fi" platforms don't have any investor protections or guarantees of any kind.
-cut-

True, but to be fair, that applies with anything else in crypto, not just DeFi. For your self-custodial cryptos, you are either counting to:

1. Level of security, that you can provide by yourself
2. Team not rugging you
3. Unexploitable, flawfless code.

I guess that's why most people prefer centralized finance than "De-Fi". It provides investor protections and guarantees for complete peace of mind. All in exchange of giving away your personal information (KYC). "De-Fi" provides greater privacy and freedom, but it's extremely-vulnerable against hacks, theft, and scams.

If you lose your money in a "De-Fi" platform, it will be gone forever. No way to get it back unless the creators/developers of the platform decide to remedy the situation. So there's that. Hopefully, people's perception of "De-Fi" will change in the future as developers beef up security. We're still in the early beginnings, anyways.

You are correct. Those things just weigh so much more in comparison. Because no matter what downsize you are comparing it into, when it comes to "losing all your money", DeFi always loses. And it's not like we couldn't make centralized finance better as well.

There are strengths on decentralization, but real world doesn't operate like that, so it doesn't always fit. We have concentrations of power and wealth, and looks like we are stuck with them for now, because getting rid of them would mean end of the world as we know it, that would need to build from the ground up.

There are also cemented laws that majority of the people wants to keep, to fight corruption etc. And this brings us the necessity of KYC/AML overlapping the decentralization in cryptos. While in the protocol level we can try to go towards decentralization, it will always collapse with real world rules, and the very essence of cryptocurrencies is basically not complying with them.

Also decentralization brings us things we don't like, like freedom to push all sorts of "Oridinals" and scams that are clogging the system and pumping the fees. There's really nothing we want do about those though as they come as a trade-off of being free.

[Hispo]

...

What are those concerns you do understand if that topic is even a question?

In year 2022 alone there was $3.8 Billion stolen by exploiting DeFi Protocols. How is that future of money? And how is that equally valid alternative for banks? Imagine this happening with actual banks. They wouldn't exist if even fraction of this was a common thing in them.

That is exactly the unique reason which has turned me away from using Defining the long term all this time, to be honest. Whenever I have some spare money which I would like to save for the future, I try to find way for it to generate interests, slowly but steadily. Defi was an attractive option for me and I was kind of looking forward to providing liquidity in the form of stable coins to protocolos like Uniswap and Sushi, but with all those hacks and exploits which emptied all the pools of liquidity of other protocols (like Pickleswap) I would not be willing to put my trust in the code of a smart contract I cannot audit myself (I am not a programmer or a coder, so I cannot do it).
I wished those Defi protocols were not so targeted by hackers and thieves as often as they are, so I could sleep tight at night while providing liquidity to their pools at the same time, but It is not possible as it stands today.

Unfortunately, Defi has hurt many people by promising much and delivering week smart contracts, getting broken into by hackers.

[shinratensei_]

I guess that's why most people prefer centralized finance than "De-Fi". It provides investor protections and guarantees for complete peace of mind. All in exchange of giving away your personal information (KYC). "De-Fi" provides greater privacy and freedom, but it's extremely-vulnerable against hacks, theft, and scams.

If you lose your money in a "De-Fi" platform, it will be gone forever. No way to get it back unless the creators/developers of the platform decide to remedy the situation. So there's that. Hopefully, people's perception of "De-Fi" will change in the future as developers beef up security. We're still in the early beginnings, anyways.

also the layer of complexity that DeFi usually has, plenty of people just sticks to exchange, and never venture or explore the on-chain feature at all and this is the reason why exchange such as binance got massive liquidity.

an example of people's fear toward defi hacking is recent news about hyperliquid, just one bad rumour about hyperliquid few days ago already making people scared and withdrawing their money from onchain to exchange. though it doesn't make a dent toward $HYPE price but people are still scared it seems and want to see until the dust settles first.

can't blame them, past hacking were truly traumatizing.

[Abiky]

True, but to be fair, that applies with anything else in crypto, not just DeFi. For your self-custodial cryptos, you are either counting to:

1. Level of security, that you can provide by yourself
2. Team not rugging you
3. Unexploitable, flawfless code.

Of course. With crypto, you're responsible of securing your own money. This takes some time and effort to achieve. Not everyone is willing to do their own research to properly secure their crypto assets. It's why most people prefer to leave everything in the hands of a custodian (centralization).

For the unbanked, "De-Fi" does wonders. Especially protocols and dApps without KYC. The whole point is to allow everyone to participate in the digital economy. If "De-Fi" complies with KYC/AML rules, doesn't that make it the same as "Ce-Fi"? As developers continue to improve "De-Fi", flaws or vulnerabilities will be reduced to a minimum. A safer "De-Fi" ecosystem will surely restore confidence among the masses. Who knows? Maybe there's a future for "De-Fi" after all.