Another week of DeFi hacks, but ZK-proof development heats up: finance redefined

Welcome to Finance Redefined, your weekly dose of essential decentralized finance (DeFi) news – a newsletter designed to bring you the most significant developments of the past week.

Last week in DeFi was dominated by exploits and hacks, with three DeFi platforms losing nearly $39 million. Alphapo hot wallets were mined for over $32 million, Era Lend was mined for $3.4 million, and decentralized finance protocol Conic Finance was mined for nearly $3.5 million.

In better news, the DeFi ecosystem was buzzing with developments in zero-knowledge (ZK-proof) scaling solutions as the Layer 2 sector heats up despite the bear market.

Exploits and bearish market conditions have taken their toll on DeFi protocols, with the total value locked in DeFi protocols seeing a significant drop over the past week.

Alphapo hot wallets hacked for over $31 million

Crypto payment platform Alphapo had drained around $31 million from its Ether (ETH), TRON (TRX) and Bitcoin (BTC) hot wallets, security experts reported on July 22. Since the amount of bitcoin stolen is uncertain, the numbers could be even higher. .

According to on-chain sleuth ZachXBT, the funds were stolen from the Ethereum network, then exchanged for ETH before being linked to the Avalanche and Bitcoin blockchains. DeDotFi’s security team said a leak of private keys may have caused the hack. Investigations are still ongoing.

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Era Lend on zkSync Exploited for $3.4 Million in Reentrancy Attack

zkSync lending app Era Lend was mined for $3.4 million in crypto, according to a July 25 report from blockchain security firm CertiK. The attacker used a “read-only reentrancy attack” to drain the funds, which is an attack that interrupts a multi-step process and then causes it to continue after a malicious action has been performed. Specifically, a “read-only” re-entrance does not update the state of a contract.

According to the report, the attacker drained funds in two transactions using the external account 0xf1D076c9Be4533086f967e14EE6aFf204D5ECE7a. The attacker relied on a vulnerability in the “callback function and _updateReserves” to manipulate a contract to report old values ​​that had not yet been updated.

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Knowledgeless Tech Development Intensifies in a Bear Market

ZK proofs are cryptographic methods that allow one party to prove to another party that something is true without revealing any sensitive underlying private information. The technology has been a hot topic of discussion among crypto veterans lately. On July 19, during the zkDay event – ​​part of the Ethereum Community Conference in Paris – over 2,000 attendees arrived at a small venue on rue l’Aubrac to get a glimpse of the latest ZK projects on display. P0x Labs, the developer behind the ZK Manta Network protocol, even announced a $25 million raise at the event.

Currently, technology plays a critical role in powering Layer 2 scaling solutions. By computing a simple cryptographic proof on Layer 2, transactions can be finalized almost instantly and the record is sent back to the underlying blockchain as a brief proof. At the same time, ZK proofs can enable private transactions that do not transmit sensitive information to observers.

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Optimism Trading Volumes Surpass Abitrum for First Time in Six Months

The Optimism network has surpassed Arbitrum in transaction volume for the first time in six months, according to July 27 data from blockchain analytics platform Artemis. Both networks are Ethereum layer 2s that use optimistic aggregation technology, which compresses and aggregates transactions before submitting them to Ethereum, potentially reducing transaction fees.

The volume on optimism fell behind Arbitrum in January, at the end of the first season of its “quest” feature. However, it reclaimed the top spot on July 25 when Worldcoin launched.

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DeFi Market Overview

The total market value of DeFi saw a bullish surge after three bearish weeks. Data from Cointelegraph Markets Pro and TradingView shows that the top 100 DeFi tokens by market cap had a bullish week, with most tokens trading in the green. The total value locked in DeFi protocols remained below $50 billion.

Thanks for reading our roundup of this week’s most impactful DeFi developments. Join us next Friday for more stories, ideas and insights into this dynamically evolving space.