The State of DeFi Security: What 2025 Holds

The decentralized finance (DeFi) ecosystem has emerged as a disruptive force in modern finance, but its rapid growth comes with unprecedented challenges in security and risk management. Unlike traditional financial systems with established safeguards, DeFi operates in a space where vulnerabilities—ranging from protocol exploits to human errors—can result in significant losses.
As the industry matures, the call for robust security standards, comprehensive risk management frameworks, and regulatory compliance has grown louder. Security assessments and cutting-edge technologies are becoming critical to safeguarding the integrity of decentralized protocols, ensuring trust, and paving the way for sustainable growth in this dynamic sector.
This article explores the current state of DeFi security and the innovations shaping its future in 2025.
DeFi security is new and challenging
Web3 builds on top of the technology stack of Web2, which means that these traditional risks are also inherited into the Web3 ecosystem. What used to be classified as medium or low-severity Web2 security risks, could be considered as high or even critical risk within the Web3 space. The distributed nature of DeFi also significantly lowers the barrier of entry for developing protocols that could handle hundreds of millions of dollars. Many Web3 protocols may not even have a registered legal entity, created by developers with limited experience of implementing security best practices, no corporate policies and processes for providing security guardrails. This makes security and risk management much more difficult.
Nevertheless, a strong positive sign we saw in 2024 is the drop of hacks in DeFi, according to Hacken’s 2024 Web3 Security Report, while CeFi breaches surged. This shift gives DeFi a promising head start and sets the stage for a highly anticipated year in 2025.
DeFi risk management and security standards
For DeFi, risk management and security standards are still in their infancy compared with their established TradFi counterparts, where there are many established frameworks and standards like OWASP and NIST.
The DeFi sector is still exploring while growing, with frameworks like CCSS (Cryptocurrency Security Standard) and EEA DeFi Standard that are still just beginning to gain adoption. With the third DeFi Security Summit held last November, the community is growing and DeFi security knowledge is presented, published and becoming more widespread, also acting as a great source of reference material.
However, the dominant focus of such standards and research is smart contracts. This is only one of many critical components that make up the overall threat landscape. For example, front-end security is still often overlooked for DeFi projects where attacks are becoming more widespread. With the removal of the “middle-man” in Web3, the onus for security has now fallen to the respective project and its end-users. As such, this presents a much broader attack surface, which still remains largely unexplored.
DeFi regulatory compliance
With the introduction of institutional clients entering the cryptocurrency space, the lines between TradFi and DeFi begin to blur. DeFi will have to evolve to meet the stringent security requirements demanded by such an institutional user base.
To address the need for security within DeFi, regulatory compliance will be needed. This is difficult to achieve, due to the distributed nature of blockchain technology where everything is governed by smart contracts. DeFi operates in this very manner, but can you, the reader, answer this question: In which country or jurisdiction does a smart contract reside? With the recent case of Tornado Cash, founders or entities associated with DeFi projects may still find themselves affected by laws and regulations, despite the decentralization of smart contracts.
Multiple jurisdictions are creating their own regulatory legislation to ultimately prevent DeFi technology from being leveraged by malicious actors. A common theme that is seen through every DeFi related regulatory framework is security. As such, respectable protocols are now facing a prospect of addressing the security needs of the protocol and its users.
This trend of looming regulations has driven the need for new security innovations, as DeFi projects are now becoming more aware of what they must achieve. Projects are starting to lean on established security practices of TradFi, as the lines keep on blurring. Web2 based solutions have to be adapted to fit the security needs of a Web3 based world. As an example, when a security incident occurs within Web3, the actions are completed within seconds and are immutable, while in a Web2 world, organisations would have more time to detect and respond to an incident and may also have the ability to revert the malicious actions (e.g., credit card theft). New solutions will have to be developed in order to meet these new challenges, blurring old with new.
DeFi security assessments
The DeFi community collectively learns from security incidents and their associated losses. The ecosystem has adopted its own approach to security in the form of highly-specialized smart contract audits and bug bounties. Security vendors are creating more formalised assessment methodologies with more comprehension about the threat landscape.
GRVT has engaged both NCC Group and Spearbit for end-to-end security auditing work, giving us and our users confidence about the platform’s overall security. Similarly, Web3 specific bug bounty programs like Immunefi help hundreds of DeFi projects to crowdsource security testing work.
DeFi security technologies
Lastly, DeFi projects are increasingly likely to adopt advanced technologies such as zero-knowledge cryptography and secure wallet management practices with multi-party computation (MPC). Stronger private key management systems such as DFNS as used by GRVT, conveniently and significantly reduce the risk of one or more private keys being compromised. Historically, we have seen that lacking security around private keys has been one of the main avenues of attack against DeFi protocols, with this year’s relative reduction in breaches believed to be in part attributed to these improvements in this area.
We are at a point with these best practices, standards, auditing and technologies where DeFi projects have the option to implement higher degrees of security than ever before. We expect innovations in DeFi Security only to accelerate further year on year given the industry's rapid pace.