Flourishing DeFi Hacks: ZK-Proof Development Emerges as Trend – Finance Redefined

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

The previous week in DeFi witnessed an abundance of exploits and hacks, resulting in a loss of nearly $39 million across three DeFi platforms. Alphapo, Era Lend, and Conic Finance were the unfortunate victims, losing $32 million, $3.4 million, and $3.5 million, respectively.

Fortunately, amid these security incidents, the DeFi ecosystem experienced significant advancements in zero-knowledge-proof (ZK-proof) scaling solutions, signifying the growth of the layer-2 sector even during a bear market.

Despite these exploits and unfavorable market conditions, DeFi protocols encountered a considerable drop in the total value locked in over the past week.

Alphapo Hot Wallets Compromised, Resulting in $31 Million Theft

Security experts revealed that approximately $31 million worth of Ether (ETH), TRON (TRX), and Bitcoin (BTC) were drained from Alphapo’s hot wallets on July 22. Since the exact amount of Bitcoin stolen remains uncertain, the total sum might be even higher.

According to on-chain investigator ZachXBT, the funds were stolen on the Ethereum network, exchanged for ETH, and subsequently transferred to the Avalanche and Bitcoin blockchains. The DeDotFi security team suspects a leak of private keys as the cause of the hack, with ongoing investigations being conducted.

Era Lend on zkSync Exploited: Losses Amount to $3.4 Million

Blockchain security firm CertiK reported that Era Lend, a lending app on zkSync, fell victim to a $3.4 million exploitation. The attacker executed a “read-only reentrancy attack,” interrupting a multistep process and allowing it to continue after a malicious action was performed. Notably, this type of reentrancy attack does not update the state of a contract.

As stated in the report, the attacker employed the externally owned account 0xf1D076c9Be4533086f967e14EE6aFf204D5ECE7a to drain funds in two transactions. By exploiting a vulnerability in the callback and _updateReserves function, the attacker manipulated the contract into reporting outdated values that had not yet been updated.

Rapid Advancements in Zero-Knowledge-Proof Technology Amidst the Bear Market

ZK-proofs utilize cryptographic methods to prove the truth of a statement without revealing any sensitive private information to the other party involved. This technology has recently sparked numerous discussions among crypto veterans. The zkDay event, held on July 19 as part of the Ethereum Community Conference in Paris, saw over 2,000 attendees gathering to witness the latest ZK projects. Manta Network, the developer behind ZK protocol, even announced a successful $25 million raise during the event.

ZK-proofs are currently instrumental in powering layer-2 scaling solutions. By allowing for the computation of a simple cryptographic proof on layer 2, transactions can be swiftly finalized, with the record sent back to the underlying blockchain as a concise proof. Furthermore, ZK-proofs enable private transactions that do not disclose sensitive information to observers.

Optimism Surpasses Arbitrum in Transaction Volumes after Six Months

According to blockchain analytics platform Artemis, the Optimism network has surpassed Arbitrum in transaction volume for the first time in six months. Both networks are Ethereum layer 2 solutions utilizing optimistic rollup technology, which consolidates and batches transactions before submitting them to Ethereum, potentially reducing transaction fees.

Optimism fell behind Arbitrum in January as season one of its “quest” feature concluded. However, it regained the top spot on July 25 with the launch of Worldcoin.

Overview of the DeFi Market

After three bearish weeks, the total market value of DeFi experienced a bullish surge. Data from Cointelegraph Markets Pro and TradingView indicates that the top 100 DeFi tokens by market capitalization had a positive week, with most tokens trading in the green. However, the total value locked in DeFi protocols remained below $50 billion.

Thank you for reading our summary of the most impactful DeFi developments from this week. Join us next Friday for more stories, insights, and education concerning this rapidly advancing space.

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