The cryptocurrency market has suffered some major setbacks over the years, especially hacking incidents which in turn had a negative impact on cryptocurrency prices. Many exchanges have since then taken necessary steps to prevent hacking but clever hackers have shifted their attention from hacking accounts on exchanges to hacking DeFi loans.

Numerous DeFi loan exploits have been reported in 2021, raising concerns about the safety of parting as a lender on such platforms. bEarn, a yield farming protocol based on the Binance Smart Chain lost stablecoins worth $11 million in a recent exploit. The platform released a report stating that the hacker took advantage of some flaws in the smart contract, including an incorrect withdrawal function. The malicious actor managed to withdraw more BUSD than they were supposed to.

bEarn froze all its bVaults and contacted Binance to block the attacker’s address. The DeFi loans platform also stated that it would compensate everyone that fell victim to the hack. Another DeFi project called DeFi100 (CRYPTO: D100) has also resulted in the loss of cryptocurrencies worth millions of dollars. However, this project was not the result of a hacking incident but rather a fraud incident where the platform’s developers scammed unsuspecting investors of $32 million in total.

A crypto analyst who goes by the Twitter handle @CryptoWhale revealed a message left behind by DeFi100 stating that the project scammed its users. The crypto analyst warned investors that there would likely be numerous similar fraud incidents, especially as the bull market fades.

Another hacking incident on the PancakeBunny DeFi protocol, also based on the Binance Smart Chain, was reported days ago. It was by far the largest exploit, in which the hacker stole cryptocurrencies worth more than $200 million. A report from the PancakeBunny team revealed that the malicious actor executed the attack through a flash loan in which they borrowed a large amount of Binance Coin, which were then used to manipulate the price of Bunny. Similarly, all the investors affected by the hack will be fully reimbursed.

The three incidents unsurprisingly caused the involved cryptocurrencies to lose some value. The attacks also took place strategically during a bear market, thus allowing the malicious actors to execute their strategies under the radar.

Are DeFi loans as risky as suggested by the latest incidents?

The latest incidents have created a bad rep for DeFi protocols, highlighting the need for investors to exercise caution. On a positive note, such incidents also provide an opportunity for developers to identify weaknesses on such platforms, which can then be dealt with to avoid such incidents.

DeFi loans are generally not a bad idea, and neither are they supposed to carry risks such as susceptibility to hacking. Nevertheless, those risks have emerged, and they need to be plugged. Unfortunately, the impact of such incidents cannot be understated. The cryptocurrency market is highly sensitive, especially when it is just cooling down from a major bull market.

Negative news creates a shockwave of sell-offs in the market and can potentially influence cryptocurrencies not involved in the malicious attacks. Unsuspecting investors holding one of the affected coins may panic sell the rest of the coins in their portfolio. In other words, the ripples of a crypto hack might impact the entire market, thus highlighting the urgency in plugging such vulnerabilities. Fortunately, crypto platforms seem to have learned from their past mistakes. Many of them have some insurance that protects investors by reimbursing them in case of loss through malicious hacks and scams on their platforms.