Decentralized finance (DeFi) services revenue is rising, despite the recent US$73 million hack on Curve Finance, a stablecoin-focused decentralized exchange (DEX) and lending protocol.
Over the past week, DeFi services revenue, the sum of fees generated from decentralized applications, fell to US$6.26 million, from US$7.16 million the week prior, but remains higher than the US$5.94 million generated in the week before the Curve Finance hack, according to Forkast Labs data.
Curve Finance was hacked for US$73.5 million worth of cryptocurrencies on July 31, making it the ninth-largest DeFi hack in history. At least US$3.21 billion of total value locked (TVL), the value of all assets deposited in DeFi protocols, were wiped out in the week following the hack. DeFi’s TVL was measured at US$43.81 billion on July 30, DeFiLlama data shows. But Forkast Labs data suggests that DeFi platforms are generating more revenue, despite the exploit.
“The continued growth of DeFi revenues suggests that investors are not deterred by such setbacks in the long run. They recognize the inherent risks and yet continue to engage in the sector,” Jonas Betz, crypto market analyst and founder of consultancy firm Betz Crypto, told Forkast.
“[Hacks] are simply part of the game and represent a fundamental risk of which every DeFi investor should be aware of.”
The attack on Curve Finance raised additional concerns for the industry, due to the over US$100 million worth of DeFi loans of Curve Finance founder Michael Egorov, which were backed by over 47% of the Curve (CRV) cryptocurrency’s circulating supply. Investors are worried that Egorov’s potential liquidation could endanger the entire DeFi space.
The exploit adds to the growing concerns around the safety of user funds locked into DeFi protocols, which have been the primary targets of bad actors. DeFi hacks amounted to over US$3.1 billion worth of stolen funds last year, accounting for 82.1% of the crypto hacks in 2021, according to Chainalysis.
DeFi’s TVL, a popular measurement often used to measure the value of the DeFi market, took a nosedive during the Terra-Luna crash in May 2022, plunging from its glory days of overUS$136 billion on May 6, just before Terra’s UST lost its dollar parity.
“With [TVL] dropping 7% to 8% post-hack, amounting to billions, DeFi’s TVL most certainly did see an immediate impact, with AAVE’s TVL dropping 15%,” wrote Eitan Katz, the co-founder and chief executive officer of decentralized money transfer protocol Kima, in a statement shared with Forkast.
“However, it is true that DeFi’s TVL did not collapse to the level one might have anticipated. This is for a number of reasons, including that DeFi investors have learned to be more resilient and calculative toward risk assessment before taking action.”
Ethereum’s TVL fell 7.98% in the past week to US$21.8 billion, while TVL across all chains fell 5.477% to US$38.13 billion, from US$40.34 on Aug. 17, according to DeFiLlama.
Curve Finance’s TVL fell 28.8% in the two days following the hack, to an over two-year low of US$1.68 billion on Aug. 1, but recovered to US$2.41 as of Aug. 14. The protocol’s TVL stood at US$US$3.26 billion on June 30, before the exploit occurred, according to DefiLlama.
TVL across all blockchains fell 6.71% within two days following the exploit, to US$40.87 billion on Aug. 1, recovering to US$41.92 billion on Aug. 14. The total TVL across all blockchains was valued at US$43.81 billion on the day prior to the Curve exploit.
Aharon Miller, the co-founder and chief operating officer of crypto payment app Oobit expects the DeFi industry to fully recover over time, despite the drop in TVL.
“It is like with the hotel industry. In times of geopolitical events, the hospitality industry suffers, but after a few months, tourists return and a year later, new visitor records are reached. We will see similar developments in the DeFi space,” wrote Miller.
Over 73% or US$52.3 million of the stolen funds have already been returned by the exploiters, according to on-chain intelligence firm PeckShield, while Curve is offering a US$1.85 million bounty to anyone who can identify the exploiter.
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