“However, the crux of the problem lies not in platforms giving out the flash loans, but the unaudited smart contracts the loans are sent to and that are later exploited.”
You all heard of the recent hack at Poly Network (not to be confused with the Polygon Network) and the massive losses that was incurred by the users. Again this is the Poly Network which I have never heard of before. Not the Polygon Network which is formerly known as Matic Network. Polygon Network are the guys creating the layer 2 solutions for Ethereum. While Poly Network is some Defi project I am guessing. I have never used this platform or even heard of it. Basically it should be a network where users can “transfer digital tokens from one blockchain to another“. So I am guessing if you want to transfer X assets in BSC into Y assets in ERC20 or something like that.
And I refer you to this article about the Poly Defi hack – here. The article does state that it is not the platform that is the issue but the smart contracts themselves. As these smart contracts are not audited or battle tested, they are prone to various vulnerabilities and hacks. I am pretty sure that this kind of issue is rather commonplace in the Defi space. Organizations and businesses want their platform up and running as soon as possible so as to get into the market as quickly as possible. So it is no surprise that such technology gets hacked especially when big money is involved. In this recent hack, around USD 610 million was stolen. That is one big big loss to the users if the funds aren’t returned. But guess which blockchain take their time and try to get things right the first time. Instead of trying to solve problems, they are ensuring that there are minimal problems in the first place. Well that is Cardano. One of the oldest yet one of the “slowest” in development. We don’t see them pumping out tons of projects or new versions or new features everyday. However it seems that all of their code have been audited and verified by independent third party auditors. This is not always a bad thing. In fact looking at Defi and that involves a lot of money, this is a good thing!
That is why I am hoping that Cardano will soon take over the Defi space. I mean hacks are becoming more and more serious. This recent hack was the largest in Defi history. These kind of headlines will not be good for crypto. And if platforms don’t start to take security seriously, they will lose customers and investors will lose confidence in Defi soon. I definitely don’t want to wake up every morning to news of someone stealing my money. With Cardano having smart contracts soon, this should draw some of the Defi platforms away from other networks to Cardano. Again this is a positive development. And hopefully we will see less of such news coming out.
And the price of ADA (native token for Cardano network) has been rising quite significantly. So looks like the market is realizing that you do need security in your protocols. If not, it will never get the traction it needs to go to the top. Only when developers start taking security seriously, we will see the mass adoption by users. If you are interested about Cardano and ADA, check out my article here.
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