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DeFi lost $3.1 billion in the first half of 2025.
Not to sophisticated nation-state actors or zero-day exploits, but to basic attacks that could have been stopped with the right approach. The problem isn't that protocols don't care about security. It's that they're using security models designed for banks and tech companies, not for systems where money moves at the speed of transactions and mistakes are permanent.
New to these security models? This video explains the fundamentals of EDR, MDR, XDR, SIEM, and SOAR before we dive into how they apply to DeFi:
When traditional security models meets blockchain apps
In July, BigONE exchange lost $27 million to a supply chain attack. Their security team didn't detect the breach for hours. By the time they noticed unusual withdrawal patterns, attackers had already moved funds across multiple chains and into mixers.
BigONE had a traditional Security Operations Center (SOC) - the kind used by Fortune 500 companies. Twenty-four analysts monitoring dashboards, expensive SIEM systems, compliance reports. Everything looked professional on paper.
But blockchain attacks don't show up in traditional network monitoring.
When the attackers compromised third-party software that controlled hot wallet logic, the SOC saw everything as normal system operations. The theft looked like legitimate transactions because, technically, they were.
This keeps happening because most DeFi protocols are using Web2 security models for Web3 problems.
Why traditional security keeps missing DeFi attacks?
Traditional SOCs excel at catching network intrusions, malware, and insider threats. They're built around monitoring perimeters, endpoints, and user behavior in corporate networks. DeFi protocols need protection from flash loan attacks, oracle manipulations, and governance exploits. These happen entirely on-chain, often in seconds, using mechanisms that don't exist in traditional finance.
- SOC approach: Monitor network traffic, analyze log files, detect anomalous user behavior
- Actual DeFi threats: Smart contract exploits, cross-chain bridge attacks, token price manipulations
The skills don't transfer.
A SOC analyst trained to spot suspicious PowerShell scripts won't recognize a reentrancy attack pattern in Ethereum transaction data.
Here’s what currently working..
Managed Detection and Response (MDR) services outsource the monitoring and analysis to external experts. Instead of building an internal security team, you pay a specialized provider to watch your systems and respond to threats. For DeFi, this makes more sense than traditional SOCs. The economics work better (protocols spend $60K-300K annually vs $500K+ for internal SOCs), and specialized Web3 MDR providers actually understand blockchain attack vectors.
When Compound Protocol switched to a blockchain-focused MDR service, their detection time for suspicious transactions dropped from 45 minutes to under 3 minutes. That difference matters when attackers can drain protocols in 10-15 minutes.
The catch: most MDR providers are still focused on traditional cybersecurity. The handful who specialize in Web3 security show dramatically better results.
Why the "unified platform" approach falls short
Extended Detection and Response (XDR) platforms promise to correlate data from multiple sources to catch sophisticated attacks that single-point solutions miss. For mature protocols with complex infrastructure, XDR can provide valuable visibility. But XDR platforms require internal expertise to configure and maintain effectively. Without someone who understands both traditional cybersecurity and blockchain-specific threats, implementations often generate more noise than signal.
Protocols end up spending $300K+ annually on platform licensing and internal team costs, then still miss DeFi-specific attacks because the platform wasn't configured to recognize them.
The approach that actually prevents attacks
Protocols that successfully prevent attacks don't follow traditional cybersecurity playbooks. They start with specialized Web3 monitoring for immediate threat detection, then add traditional security measures only as needed for compliance and infrastructure protection. Aave runs this model effectively.
They use Web3-specialized monitoring for protocol contracts, traditional security for development infrastructure, and automated circuit breakers for emergency response.
When oracle manipulation attempts occur, their Web3 provider identifies threats within seconds.
How to implement this models to your organization?
Protocol-Specific tuning is needed
- Configure monitoring for your specific smart contracts
- Set appropriate thresholds for your token economics
- Regular updates as protocol evolves
Integration with existing tools are must
- Connect with multisig wallets and governance systems
- Integrate with circuit breakers and emergency pause functions
- Ensure compatibility with upgrade mechanisms
Conclusion
DeFi lost $3.1 billion in six months because most protocols use security approaches designed for different problems. The networks and endpoints focus of traditional cybersecurity misses the transaction-level, smart contract-specific threats that actually drain protocol funds.
The protocols that survive are those that invest in security models matched to their actual threat landscape, not theoretical comprehensive coverage that looks good in board presentations.
At Guardrail, we provide Web3-specialized security monitoring designed for DeFi protocols. Our systems detect blockchain-specific threats and provide rapid response for protocol-specific risks.
Contact us to discuss security monitoring options for your protocol.
