Before we run to build DeFi products, first of all it requires to improve the existing blockchain infrastructure. In other words, blockchain needs improvement before using in DeFi.
Decentralized Finance is growing fast in the blockchain industry. There are more than 200 projects, which are working continuously on decentralized financial products and services. This number is increasing day by day. It means that every day a new DeFi-related project launches and starts to work.
Today, over $7 billion is locked in DeFi, Which is a significant amount. The challenge that DeFi is facing with these days is that increased growth brings along higher risks.
Blockchain needs improvement before using in DeFi; security is the main issue
The main problem in this sector is that projects do not focus on security. In fact, they focus to release their product to the market as soon as possible instead of focusing on their security of their protocols. The reality is that they have to solve existing security issues of the protocols rather than pumping out more projects. There are many examples, which developers rushed to release their new product without considering security issues.
We have witnessed in the past years that hackers could easily damage DeFi products through oracle manipulation, price feed, smart contracts and ERC-777 vulnerabilities. It was in February that bZx lost around $1 million in two separate incidents. The attacks consist of an oracle manipulation and flash loan attack. In another effort, hackers could steal $25 million from dForce. Another example could be an attack, which targeted automated market maker DeFi protocol Balancer and resulted in $500.000 lost.
The sector should seek for a solution
The DeFi sector has to seek for a solution. Otherwise, it will lose its users and popularity. It’s quite understandable that DeFi face such those problems. The main reason is that most of the projects built on top of Ethereum and Ethereum blockchain still have its own challenges. However, Ethereum developers are trying to fix the security issues by upgrading the platform to Ethereum 2.0.