Written by: @Cody_DeFi

I'm really disappointed. I never expected that a well-established DeFi protocol with 500 million TVL assets could fall apart just because of admin rights, without any time locks and ineffective multi-signature, with a single point of failure undermining an exchange that claims to be decentralized and self-custodial?

Six years have passed since DeFi summer, and I once thought the trend would improve, that protocol vulnerabilities would decrease and hackers would become less prevalent. Now it seems more like wishful thinking.

I personally was not affected by the theft of this protocol, but until the end of last year, I was still doing circular loan arbitrage on Drift. Back then, under stablecoin subsidies, the APY for savings could exceed 15%. When the subsidies ended, the returns decreased, and I withdrew, narrowly escaping a disaster. Looking back now, it feels frightening.

As an ambassador for Drift, I have recommended this exchange multiple times because its capital efficiency is indeed high. I made some money on it, and I even bought their tokens because I was optimistic. Later, those tokens plummeted by 95%, and I had long written them off as zero. After this protocol was hacked, the tokens are still at this price, which is really ironic. The capital markets have long written down the protocol theft, right?

The current sentiment is very complicated. I am a long-term oriented investor, so in the crypto space, I prefer to engage with established protocols that have stood the test of time and teams that are willing to build long-term through cycles. But now it seems you can't really judge who the true long-term believers are; most people are just talking the talk.

On the surface, the Drift hack appears to be another case of private key leakage and collateral price manipulation leading to theft. The methods are not new, but why do hackers continue to succeed?

Because the DeFi system still resembles a niche toy for geeks. Due to a lack of regulation, the project teams have unequal responsibilities. When issues arise, they can simply shut down the project, just like Balancer. This also means that even if the contract code is audited and deemed secure, you cannot confirm that the team controlling the code is trustworthy.

On the other hand, the entire DeFi ecosystem is growing wildly and has a fragmented governance structure. Drift was hacked for 280 million, with USDC transferred instantaneously through Circle's CCTP protocol without loss. Everyone is still hoping Circle can freeze the hacker's funds, but Circle does not want to engage, even if they are willing to cooperate with the U.S. government to shut down dozens of accounts instantly.

The only hope is for on-chain trading to be regulated in compliance. At that time, under regulatory pressure, these project teams will pay more attention to security issues, and the ecosystem will cooperate to freeze and trace funds. But that is an uncertain future. Currently, DeFi, in some ways, is a product on the brink of failure.

Thinking from the perspective of how a retail investor can make money in the crypto space, I once thought DeFi could serve as a tool to enhance cash returns. However, in reality, playing DeFi is like playing minesweeper; even if you clear 99% of the mines, there is still a 1% chance that you could go to zero.

Those who make money long-term in the crypto space rely on airdrops, high leverage trading, and script-based arbitrage. Essentially, these are all cyclical bets on small stakes for a big payoff. This includes why people think there are more hackers in bear markets, thus only engaging with on-chain during bull markets; during bull markets, the odds are high enough that they are willing to dance with risk. Hackers have always been present.

So, perhaps it's really helpless; I can only gradually give up the mindset of practicing long-termism in the crypto space and revert to a cyclical trading mindset, considering moving half of my funds into traditional finance, while further consolidating the remaining funds into protocols that may not yield very high returns but possibly offer greater security.

This circle is gradually extinguishing the passion of anyone with even a bit of idealism. In the end, only purely refined self-interested individuals are left.