KelpDAO Hack Seen as Growing Pain in DeFi’s Path to Mainstream Finance

A major hack at KelpDAO last month dealt a heavy blow to the cryptocurrency market. Even so, some in the industry say the breach should be viewed as part of DeFi’s path into mainstream finance.

KelpDAO was hit last month after 116,500 rsETH, its restaked Ether token, was stolen from a cross-chain bridge. The haul was worth about $292 million at the time.

CoinDesk reported on May 2 that several industry experts believe the KelpDAO hack exposed vulnerabilities in DeFi but will not keep institutional investors from entering the market.

“DeFi platforms are opening new ways for investors to use capital more efficiently,” Nick Cherney, head of innovation at Janus Henderson, told CoinDesk. New challenges inevitably come with risk, he said, adding that the incident will not become an obstacle to financial innovation.

Some security experts said the DeFi industry needs stronger defenses against hacking. Institutional investors need systems they can trust before committing capital. “The on-chain asset management environment is a dangerous place and an easy target for attackers,” Paul Vixie, chief security officer at Gauntlet, told CoinDesk. “The safety of the entire system is ultimately determined by its weakest point.” He called for a zero-trust security model, under which every access attempt is treated with suspicion and verified, along with layered defenses including continuous monitoring.

Bhaji Illuminati, chief executive officer of Centrifuge Labs, said large institutional inflows will require clear verification of invested assets. Collateral structures must be disclosed transparently, and the smart contracts responsible for execution must be designed in a predictable form that investors can trust.