The State of DeFi Exploit Risk

Stablecoins: The Revolution in Global Money Transfers

October 8, 2025 Edited by Alexandra Levis Was this newsletter forwarded to you? Sign up here.  Hi readers,   In today's newsletter, Cicada Partners Co-Founder Christian Lantzsch says that DeFi protocols can rival or surpass traditional financial security standards and introduce frameworks to better assess risks in real-world asset applications for smarter capital allocation.   Then, Nonco CEO Fernando Martinez writes that stablecoins are no longer just a bridge between crypto and fiat — they are becoming the rails of global commerce.   Thanks for joining us.   - Alexandra Levis From the Analyst The State of DeFi Exploit Risk The decentralized finance (DeFi) sector has undergone a remarkable security transformation, achieving a 90% reduction in exploit losses since 2020 and positioning itself as mature financial infrastructure capable of institutional adoption. Our analysis  reveals that DeFi protocols have not only survived the "experimental era" but have systematically evolved into some of the most secure financial systems in existence, with daily loss rates plummeting to just 0.0014% by 2024.   This evolution represents more than statistical improvement; it demonstrates that decentralized financial systems can achieve and maintain institutional grade security when comprehensive risk frameworks are implemented. The journey from 30.07% annualized losses in 2020 to 0.47% in 2024 marks the transition from experimental protocols to mature financial infrastructure capable of serving institutional scale capital deployment. Five distinct security phases have defined DeFi's maturation: The "Experimental Era" of 2020 saw devastating 30.07% annualized losses due to unaudited smart contracts and fundamental vulnerabilities. The "First Security Revolution" of 2021 delivered an unprecedented 96% improvement through widespread adoption of professional auditing, bug bounty programs and formal verification. After a brief optimization plateau in 2022 and concerning backslide in 2023, the "Comprehensive Security Achievement" of 2024 established new standards with 74% loss reduction despite increased protocol complexity. Attack patterns have fundamentally shifted, revealing both progress and evolving challenges. Yield aggregators, which dominated early DeFi hacks at 49% in 2020, have declined to just 14% by 2024 as protocols matured. Conversely, trading and automated market maker (AMM) platforms emerged as primary targets, growing from 0% to 18% of attacks as attackers focus on high-value, high-liquidity protocols. Most significantly, private key compromises have become the fastest-growing attack vector, jumping from 0% to 20% of incidents, highlighting that as technical security improves, attackers increasingly target operational security weaknesses. The lending sector exemplifies this transformation most dramatically, achieving an extraordinary 98.4% improvement in security from 2020 baseline levels. DeFi lending protocols now maintain daily loss rates of just 0.00128%, making them 62.5 times more secure than during the experimental period. This improvement encompasses comprehensive protection against smart contract vulnerabilities, flash loan attacks, pricing manipulation, oracle failures and governance exploits.   Why this matters: The security achievements documented in this analysis fundamentally challenge prevailing narratives about DeFi risk and demonstrate that decentralized protocols can match or exceed traditional financial system security standards. The introduction of the Structural Risk Factor (SRF) framework provides a methodology for accurately assessing protocol risks in real-world asset (RWA) applications, enabling more informed capital allocation decisions. As institutional adoption accelerates and regulatory frameworks crystallize, these security improvements position DeFi as legitimate financial infrastructure rather than experimental technology, with profound implications for the future of stablecoins and global finance.   The data reveals that DeFi has successfully transitioned from high-risk experimental protocols to secure financial infrastructure, with comprehensive defense systems now addressing multiple attack vectors simultaneously rather than defending against individual threats in isolation. This transformation establishes the foundation for complex decentralized financial products and institutional-scale capital deployment, proving that community-driven security innovation can achieve results that rival centralized alternatives.  - Christian Lantzsch, co-founder and director of credit, Cicada Partners Institutional Outlook Stablecoins: The Revolution in Global Money Transfers Every day, billions of dollars move across blockchains through stablecoins. The market is dominated by USDT ($175B market cap) and USDC ($75B), but a growing ecosystem of new entrants is expanding the landscape. Stablecoins are no longer a crypto sideshow — they're becoming one of the largest financial innovations since the rise of electronic payments. Their use cases are broad, but four stand out: Hedging in high-inflation economies Cross-border payments and remittances DeFi and programmable finance Trading and liquidity Of these, the cross-border and remittance use case has the biggest growth potential. USD-denominated stablecoins are quietly replacing SWIFT for small and mid-sized flows — allowing money to move across the world in seconds, not days. Stablecoins vs. SWIFT: reinventing cross-border money What's being disrupted is not SWIFT in general, but SWIFT as the global rail for dollar transfers. For decades, the U.S. dollar has been the unit of account for global commerce, and SWIFT has been the messaging system coordinating those flows. Now, instead of SWIFT as the intermediary, USD stablecoins themselves serve as the transmission rail: programmable, verifiable and available 24/7.   Stablecoins aren't yet replacing SWIFT at scale — they still account for less than 1% of global money flows — but in remittances, B2B payments and e-commerce, USD stablecoins are already becoming the faster, cheaper complement to the dollar's traditional wiring system. Speed, cost, adoption — here's the comparison (2025): The problem: two states of money While USD stablecoins move instantly in the digital world, the real economy still runs on local fiat. That forces liquidity providers to bridge two different states of money: Digital (USD stablecoins). Fiat (local currencies). Today, this mismatch creates friction. Liquidity providers end up holding pesos, reals or naira overnight, unable to recycle capital until banks reopen. The fintech or end-user benefits from instant settlement — but the provider absorbs the cost of locked balances. In effect, stablecoin adoption is capped by the size of provider balance sheets. The solution: FX on-chain = one state FX-on-chain protocols collapse the two-state problem into a single state: digital. Instead of moving between stablecoins and fiat through banks, FX-on-chain enables direct swaps between USD stablecoins and local-currency stablecoins. This unlocks two key advantages: Instant conversion: USDC/USDT holders can sell directly into MXN-stables, BRL-stables, or COP-stables, which can then be redeemed for fiat instantly. Flow matching: Global remittance flows (selling USD to buy local) naturally meet corporate or institutional flows (selling local to buy USD). On-chain pools match these in real time, netting out exposures and recycling liquidity 24/7. By unifying flows digitally, liquidity providers are no longer stuck warehousing risk. Instead, capital circulates continuously on-chain — just as it does in global FX markets, but with instant settlement, lower costs and transparent liquidity. Looking ahead Stablecoins are no longer just a bridge between crypto and fiat — they are becoming the rails of global commerce. From households in Argentina hedging inflation, to exporters in Nigeria settling invoices, to institutions arbitraging spreads, stablecoins are embedding themselves everywhere. The future hinges on three fronts: FX on-chain – collapsing fiat and digital into one state to enable true multi-currency settlement. Regulation – defining guardrails without stifling innovation. Non-USD stables – the rise of euro, yen and local-currency stablecoins to further localize adoption. If the past decade was about bitcoin as "digital gold," the next will be about stablecoins as "digital fiat" — currently only digital dollars and ultimately, digital fiat for everyone, everywhere. -  Fernando Martínez, chief executive officer, Nonco Keep Reading  Commentary: Global Crypto ETF and ETP flows News: BlackRock's most profitable ETF News: Bitcoin hits new highs Commentary: US Crypto September Recap Opinion: Speculation keeps markets honest As always, get the latest crypto news from coindesk.com and market updates from coindesk.com/indices. Crypto Long & Short: A newsletter from CoinDesk Were you forwarded this newsletter? Sign up here.  Copyright © 2025 CoinDesk, All rights reserved.  Bullish (GI) Ltd, c/o Fiduciary Management Limited, Suite 23, Portland House, Glacis Road, Gibraltar,Gibraltar,GX11 1AA,, Unsubscribe Manage Preferences