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CipherTrace: Most of crypto crimes in 2020 emanated from DeFi

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  • CipherTrace confirms a drop in cryptocurrency crime last year.
  • DeFi contributed the most to the incidents recorded in 2020.

A recent statement from CipherTrace, a cryptocurrency intelligence provider, has also confirmed a drop in the number of crimes that happened within the crypto space last year.

Many people are now aware of Ponzi schemes, which caused the most loss in the crypto market over the years. While, on a general note, the crime rate with cryptocurrencies dropped in 2020, decentralized finance (DeFi) made up the most crime recorded, from several protocol hacks and rug pull especially.

CipherTrace posts a 57% drop in crypto crime

According to the post, the losses incurred from crimes in the cryptocurrency market dropped by 57 percent in 2020, compared to the previous year. The crypto market lost about $4.5 billion in 2019; however, the figure reduced to $1.9 billion last year. Aside from the awareness about Ponzi schemes, CipherTrace explained that many platforms also beefed up their security systems to prevent attacks or hack.

During H1 of 2020, there was more increase in fraudulent investment or Ponzi schemes, followed by crypto thefts and ransomware attacks. Chainalysis recently made a similar publication, saying that illicit crypto transactions declined from 2.1 percent to 0.34 percent from 2019 to 2020. However, illegal transactions emanating from ransomware attacks surged by 311 percent.

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DeFi recorded the most crime in 2020

As per CipherTrace, the majority of the incidents that occurred in 2020 were from decentralized finance protocols. Almost 99 percent of the crime that happened in H2 of 2020 stemmed from hacks and exit scams, especially rug pulls. Cryptopolitan reported several incidents about the exploit of DeFi protocols.

“Thefts from hacks against centralized exchanges continue to decrease as these financial institutions mature and adopt stronger security measures,”

However, 2020 saw a surge in decentralized finance-related crime, the majority of which were “rug pulls,” the chief executive officer at CipherTrace, Dave Jevans, said.

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DeFi Total Value Locked Hit ATH as Crypto Market Sees Resurgence

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The decentralized finance (DeFi) ecosystem has printed its highest Total Value Locked (TVL) today, riding on the back of the resurgence in the broader market. Per data from DeFi Llama, the TVL covering all blockchain protocols is now pegged at $223.23 billion, a massive uplift from the $21.4 billion recorded from January 1 this year. 

DeFi TVL Source: DeFiLlama

Per the DeFi Llama data, decentralized exchange liquidity pool on Ethereum designed for efficient stablecoin trading, Curve Finance, maintains the largest share of the pie with a value of $17.08 in TVL. Lending protocol, Aave ranks next with a total of $17.02 billion, while Maker also comes off with a total value locked of $15.43 billion. The growth of the DeFi ecosystem has largely maintained an upward trajectory, as more investors, including retail and institutional investors, began leveraging the earning options the emerging protocols that make up the ecosystem offers.

DeFi creates the most direct threat to traditional finance as the emergence of lending protocols for instance has lowered the barrier to entry for accessing loans. Many new investors also find it easy to commit their funds into the DeFi ecosystem as these protocols are governed by smart contracts, which makes them non-susceptible to the lapses of human-fueled organizational management.

Future Growth to be Backed by Mainstream Market

There is a more positive outlook in the broader digital currency industry, fueled by the optimism of approval of the first Bitcoin Futures Exchange Traded Funds (ETF) in the U.S. Per an earlier Coingape report, the ProShares Bitcoin Strategy ETF could be coming as soon as next Monday, October 18, marking an end to the undying anticipation from investors about such a product.

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With the advent of the ETF, more funds will be pumped into the entire industry, and there is bound to be a trickle into the DeFi ecosystem. A number of investment managers, including Grayscale, are beginning to provide funds that track the performance of DeFi protocols, opening up additional avenues for more embrace of the DeFi tokens.

Besides the TVL, the tokens of DeFi projects are also seeing an additional boost with all protocols inking a market cap of $137.47 billion according to data from CoinMarketCap.

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Report: Driven by DeFi, North America’s crypto volume increased 1,000% year-over-year

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Digital analytics firm Chainalysis reported that the growth in North America’s crypto market has been driven by the rise in popularity of decentralized finance.

In its 2021 Geography of Cryptocurrency Report, Chainalysis said the monthly crypto transaction volume across North America grew by more than 1,000% from July 2020 to June 2021. The monthly volume reached a peak of $164 billion in May 2021 before dipping to just over $100 billion in June.

According to Chainalysis’ report, decentralized finance, or DeFi, was largely responsible for North America continuing to maintain its position as one of the largest crypto markets worldwide. DeFi transactions represented 37% of North America’s overall transaction volume from July 2020 to June 2021, with residents sending roughly $276 billion in crypto to platforms in the DeFi space. 

The Central, Northern and Western Europe region sent the most in crypto overall — $389 billion, roughly 40% of its overall transaction volume during the same time period. Chainalysis said “DeFi whales” were responsible for turning the region into the world’s biggest cryptocurrency economy, with the majority of institutional-sized transfers going towards platforms in decentralized finance.

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However, the report said North America’s DeFi transactions were led by retail investors in the last year, with many transactions under $10,000. Uniswap was the most popular DeFi platform in North America, with users having sent more than $100 billion in transaction volume between July 2020 and June 2021.

“Right now, DeFi is targeted towards crypto insiders,” said dYdX growth lead David Gogel. “It’s people who have been in the industry for a while and have enough funds to experiment with new assets.”

In addition, Eastern Asia’s crypto market has been declining, likely driven by the regulatory crackdowns on China’s crypto industry and mining in the region. Chainalysis reported P2P trade volume in China had dropped significantly over the last year, ranking the country in the 155th position worldwide compared to 53rd the year prior. Though Eastern Asia still received $591 billion in crypto transactions between July 2020 and June 2021 — a growth of 452% year-over-year — the firm labeled the region as the “slowest-growing” in its analysis.

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“Mining isn’t the only part of China’s cryptocurrency economy affected by the crackdown,” reported Chainalysis. “The government has taken other actions such as campaigning against cryptocurrency in state-sponsored media, placing official warning messages on cryptocurrency-related apps, and potentially leaning on social media companies to suppress cryptocurrency-related content.”

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DeFi Presents Multi-Billion Dollar Use Case To Disrupt Foreign Exchange Market, According to Shark Tank Star Kevin O’Leary

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Shark Tank star Kevin O’Leary is saying that the foreign exchange market is a multi-billion dollar use case for decentralized finance (DeFi), a form of blockchain technology that supporters claim can revolutionize financial services by eliminating the need for intermediaries.

During this year’s SALT conference in New York City, O’Leary relates how investors must rely on foreign exchange middlemen to invest in overseas markets. He says the extra steps required in such dealings are often unnecessary and burdensome.

“Let’s say a traditional mandate, such as I want to go long Europe, I’m going to buy 50 stocks. I have to buy Swiss francs, Euro-based stocks and British pounds because I want to trade them on their domestic exchanges.

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In between me and that transaction is what’s called the bane of the earth – the FX trader, the currency trader who clips me every time I buy and sell. Adds zero value and sucks friction out of the system. I can’t wait until we solve this problem and give them a new career shining shoes, because they add no value whatsoever.”

The celebrity investor believes that DeFi has the potential to eliminate costly middlemen from the foreign exchange market system.

“This is where DeFi can take us, on just one use case. But it’s a multi-billion-dollar one, and I want to be alive to have a regulator domestically allow me a payment system to a Swiss franc, back and forth if I want to trade it 50 times a day, with zero FX traders. That’s my mission in life, to help them find a real job.”

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In May 2020, O’Leary led a $20 million fundraising round for what is now WonderFi Technologies, a Canadian firm that plans to launch a platform to simplify access to DeFi.

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