The decentralized finance (DeFi) industry has experienced one of its most difficult weeks in months as the TVL on major networks plummeted.
According to data from Sentora, DeFi protocols on Ethereum, Solana, Arbitrum, BNB Smart Chain, and Base all recorded double-digit drops.
sharp declines on major networks
This reflects a general pullback in user activity as market conditions change and security incidents increase.
loss due to security incident
Additional data from defillama shows that Ethereum, the largest DeFi ecosystem, saw its TVL fall by about 13% to about $74.2 billion. Despite the difficulties, Ethereum still controls more than 62% of the industry.
Solana and Arbitrum suffered even steeper falls, each losing about 14% of their locked value. Their TVL now stands at around $10 billion and $3 billion, respectively.
However, Solana still holds its position as the second-largest DeFi chain , with over 8% market share.
BNB Smart Chain and Base were not spared either, losing around 10% and 12% of their TVL.
As these losses mounted, DeFi ’s total TVL dropped from nearly $150 billion to $130 billion, showing a marked slowdown in borrowing, lending, and Staking activity across the ecosystem.
Security incident causes TVL to drop further
Meanwhile, security incidents added to the TVL decline as a chain of serious exploits panicked users and weakened the market.
On November 3, 2023, Balancer — one of the industry's longest-running DeFi platforms — suffered one of the biggest exploits of the year. Attackers drained more than $120 million from its V2 vaults.
In a detailed explanation on X, the team linked the breach to a rounding error in the upscale function for EXACT_OUT transactions within the repository's batchSwap feature. This feature allows users to batch multiple transactions into one to reduce Gas Price.
“The attacker exploited incorrect rounding behavior combined with the batchSwap function to manipulate pool balances and extract value. In many cases, the mined amount remained in the Vault as an internal balance before being withdrawn in subsequent transactions,” the team said .
Meanwhile, another major disruption occurred shortly after when Stream Finance announced that about $93 million in assets held by an external fund manager had been lost.
In response, the protocol suspended all withdrawals and deposits. They also announced that pending deposits would not be processed and began withdrawing remaining liquidation .
The incident spread quickly when Elixir, a DeFi LP , said the incident forced it to suspend operations of its synthetic stablecoin deUSD.
These events together have increased attention to the underlying architecture of DeFi.
The successive failures have highlighted that sophisticated attackers can still exploit design flaws, governance loopholes, and flawed smart contract logic. These incidents reinforce long-standing concerns about structural weaknesses in the industry.
