DeFi Security and Recent Hacks

Good afternoon, my degenerate crypto friends. How are you doing this fine afternoon? It seems that A was hacked. DeFi has been hacked again. Is it safe to be in DeFi? That’s the question I want to answer today. Is it safe to use DeFi, or is it better to store your crypto in a ledger? A dropped from about 1.8 billion to 1.4 billion, which is a significant drop. However, this could be a good buying opportunity if you want to pick up some A, as it’s a decent protocol that’s been around for a long time and will likely survive this hack, as many others have. Almost anytime a good protocol gets hacked, it’s a good time to buy because it’s probably going to recover.

Understanding the Hack

So, what exactly happened with A? Is it safe to have your money in DeFi? For the most part, it is safe. Your chances of losing money in a hack are probably about 1%. Let’s look at the details. There was a vulnerability in what they call Kelp DA’s REF system, a cross-chain bridge through Layer Zero. Bridges are where people get hacked. They don’t hack the protocols or the blockchain itself; they hack the connection between blockchains through a bridge. In this case, there was a weak validation, a single signer verification flaw, that allowed the minting or draining of 116,000 RS. RS E is like a version of ETH that duplicates the price of ETH. Fake or unbacked assets were created or drained due to a bug in the bridge.

The attacker used A to deposit the stolen, invalid RS ETH as collateral and borrowed large amounts of real ETH against it. The collateral later turned out to be worthless or unbacked, so the loans couldn’t be liquidated. An analogy would be someone depositing fake gold as collateral, borrowing real cash against it, and then the fake gold is discovered, leaving the lender with losses because the collateral is no good. The important thing to know is that these hacks do happen, usually involving bridges, which are risky.

Risk Assessment in DeFi

How risky is it to use DeFi? The chance of losing money in DeFi due to hacks or exploits is material and non-trivial. Even in a bull market, it’s better thought of as a persistent background risk rather than a rare event. The data suggests a low probability per individual action but high cumulative risk over time and across platforms. From 2020 to 2026, multi-billion losses occurred every year, totaling almost 12 billion in hacks over five years. However, your chances aren’t very high, as it’s usually just a few concentrated events. Sometimes you get some recovery, but usually, you don’t.

Market Conditions and DeFi Risks

In bull markets, there’s more capital flowing into DeFi, creating bigger targets for attackers. Attackers shift to high-value exploits instead of many small ones, increasing total losses even if the number of hacks doesn’t. Fewer incidents occur, but with higher severity per incident. A bull market doesn’t reduce your risk; it can increase your exposure because you hold more value in a riskier system. People are more reckless in a bull market. In 2021, my first year in the market, I was doing a lot of DeFi stuff because everything was going up. Sometimes I would put 500 into a platform and get 300 back the same day due to the influx of liquidity and money. It’s a Ponzi scheme. When there’s a lot of money coming in, you can make a lot of money in DeFi. Right now, it’s much more stable, and whatever yield you see is more consistent.

Human Attacks and Off-Chain Compromises

Most losses come from human attacks, phishing, and wallet compromises, accounting for 64% of losses in 2025 and 75% in 2026. Off-chain compromises, such as keys and accounts, accounted for 80% of stolen funds. Your chances of losing money in DeFi are very low. It seems scary, and it could happen to you, but it’s very low. DeFi, in general, is not risky. We’ve had incidents with big platforms like Celsius, Voyager, and FTX collapsing, but that wasn’t because of DeFi.

DeFi Strategy in Different Market Phases

The biggest risk in DeFi is being in it when the market is very hot. When the market is hot, it can turn any second. When the market turns from hot to cold, that’s when places collapse, and people lose money. You want to be in a very secure position if the market is hot, like staking in Binance, which is very solid. You don’t want to be staking in just any platform. Keep your crypto tight, in your ledger or an exchange. FTX collapsed, but exchanges like Binance are pretty secure. You don’t want to be in DeFi when things are very hot because that’s when crazy things happen, and when the market turns, it’s over.

DeFi vs. Cold Storage

Right now, is it better to be in DeFi to get a yield, or is it better to hold your crypto in your ledger or cold storage? Everything is very cheap, so you can accumulate great coins at a very cheap price. When the market turns, even if it’s not a huge bull market, the amount of money you’ll make will be much more than if you have your money stored in Tether with a 13% interest. You’ll make much more money if you buy crypto at dirt-cheap prices now and the market starts going up. That’s why I don’t have anything in DeFi right now. I would continue to buy more top coins at cheap prices.

The core trade-offs according to strate GPT are: the pros of DeFi are getting a yield, typically 2 to 10% depending on strategy, and it can compound over time. Holding your USDT here will keep compounding. The cons are the smart contract risk and stablecoin risk, although the stablecoin risk is very low. Cold storage offers maximum security, full exposure to the upside of the assets, and no counterparty risk. The cons are no yield and the opportunity cost if the market stays flat. You have to decide what you think the market will do. If you think it will go up soon, keep accumulating good coins at cheap prices. If you’re unsure, you might want your passive income, which is very good if you have enough to get a nice yield.

Me preocuparía tener tanto dinero en DeFi, pero esa también es una buena opción. Eso es todo por hoy. Espero que haya sido algo educativo y un poco claro. Espero volver mañana. Que tengas un gran día. Disfruta de tu vida. Sé feliz. Nos vemos mañana. Adiós.