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Cryptocurrency investors are reportedly exiting the decentralized finance (DeFi) space following two high-profile hacks.<\/span><\/p>\n Close to $14 billion has been pulled from DeFi projects in recent weeks, the Financial Times (FT) <\/span>reported<\/span><\/a> Wednesday (May 6), citing the data firm DefiLlama.\u00a0<\/span><\/p>\n This came after hackers tied to the North Korean government <\/span>stole $290 million<\/span><\/a> from the <\/span>KelpDAO<\/span><\/a> platform and used the stolen funds as collateral to borrow $230 million from <\/span>Aave<\/span><\/a>, the sector\u2019s biggest lender. Weeks earlier, hackers <\/span>siphoned $280 million<\/span><\/a> from DeFi exchange <\/span>Drift<\/span><\/a>.<\/span><\/p>\n The FT characterizes the incidents as a major blow to DeFi, which replaces intermediaries like banks and brokers with automated contracts. In this sector, the report added, the security of the blockchain is crucial. The incidents also happened at a time when the <\/span>traditional financial world<\/span><\/a> is experimenting with blockchain adoption.<\/span><\/p>\n \u201cThe fallout is severe,\u201d <\/span>Lucas Tcheyan<\/span><\/a>, research associate at crypto group <\/span>Galaxy<\/span><\/a>, told the FT. He added that the hacks \u201cundermine[s] arguments that crypto offers a safer and more transparent alternative to legacy financial rails.\u201d<\/span><\/p>\n According to the report, the <\/span>DeFi<\/span><\/a> space saw a growth spurt in 2020, with the market\u2019s size ballooning from less than $1 billion to around $180 billion in 2021.\u00a0<\/span><\/p>\n Advertisement: Scroll to Continue<\/p>\n<\/div>\n The sector has since expanded into an interwoven network of financial applications, the FT added, though those connections have been revealed as a liability following the hacks. Since then, the market has shrunk to roughly $86 billion.\u00a0<\/span><\/p>\n In a recent episode of the <\/span>\u201cFrom the Block\u201d<\/span><\/a> podcast, PYMNTS CEO Karen Webster and <\/span>Ryan Rugg<\/span><\/a>, global head of digital assets for <\/span>Citi Treasury and Trade Solutions<\/span><\/a>, explored why the Kelp DAO incident was both a technical and behavioral failure.<\/span><\/p>\n While earlier attacks targeted private keys or flawed smart contracts, this hack involved the connective tissue of blockchain ecosystems: the messaging layer that allows for interoperability across chains.<\/span><\/p>\n \u201cPast hacks were due to stolen keys or bugs in smart contracts, this one was convincing the vault the thief was actually the owner,\u201d Rugg said.<\/span><\/p>\n As PYMNTS wrote, the incident <\/span>spotlights the tension<\/span><\/a> between crypto\u2019s desire for open, interoperable systems and the institutional demand for security and control.<\/span><\/p>\n