A Disguise of Hacks: The Shocking History of DeFi in 2021
1) Why Did Bitcoin Suddenly Crash?
In February 2021, Tesla CEO Elon Musk shook the crypto world by announcing that Tesla would accept Bitcoin payments for its cars.
Excitement surged, prices soared, and Musk was hailed as the man leading the new digital-currency era.
But by May, everything flipped.
Musk reversed course, claiming that Bitcoin’s Proof-of-Work (PoW) mining consumed too much energy and harmed the environment.
Tesla quickly suspended Bitcoin payments, and panic rippled through the market.
The result? Bitcoin’s price plummeted, and Ethereum’s Total Value Locked (TVL) — the total assets held across DeFi — dropped sharply.
2) Why Did the “Father of DeFi” Suddenly Leave the Industry?
As markets wobbled after Musk’s U-turn, another bombshell hit.
Andre Cronje, often called “the father of DeFi,” announced that he was quitting.
Cronje was the creator of Yearn Finance, one of the most influential Ethereum protocols.
He helped pioneer Curve’s ve-token model, introduced bribe mechanisms, and shaped how modern DeFi incentives work.
Then, out of nowhere, he tweeted:
“DeFi is no longer fun. I’m leaving. Goodbye.”
His sudden exit shocked the community. Tokens linked to Fantom (FTM) and other projects he had touched dumped heavily as investors panicked.
Confidence in the DeFi sector collapsed almost overnight.
3) Were the “Hacks” That Followed Real—or Just an Exit Strategy?
Right after Musk’s reversal and Andre’s departure, a wave of “DeFi hacks” began sweeping the market.
The number was so high that the period became known as “the age of hacks.”
But suspicions grew. Many incidents happened at too convenient a time to be random.
Analysts speculated that some of these were inside jobs—fake hacks used to cover rug pulls, where project owners drain liquidity and disappear.
Projects often issued statements like “We’ve been hacked, but we’ll compensate users” — and then vanished.
The pattern repeated across Binance Smart Chain (BSC), now BNB Chain, where major protocols such as Belt Finance and Pancake Bunny lost millions.
Both projects reportedly had anonymous Korean developers behind them, and both declared “hacks” before quietly shutting down — a soft rug pull in disguise.
The BSC ecosystem earned an ugly nickname: “the rug-pull playground.”
Even more ironically, several people involved are rumored to have resurfaced under new brands and research firms within the blockchain industry.
4) What Was the Biggest Problem With Early DeFi?
As the downturn deepened, people began questioning DeFi 1.0’s core flaws.
The biggest issue: governance tokens were useless.
These tokens gave holders voting power but no claim to protocol profits.
Unlike stocks, which pay dividends, most DeFi tokens simply served as tools for decision-making — while the actual revenue sat in project treasuries controlled by founders.
At first, DAOs seemed revolutionary. But when token prices crashed, many users felt they’d been scammed.
Confidence evaporated, governance tokens flooded the market, and prices spiraled downward.
A new model was needed — and that’s where DeFi 2.0 appeared.
5) Why Did DeFi 2.0 Ultimately Fail?
Projects like OlympusDAO tried to fix the old system by introducing a new mechanism: protocol-owned liquidity.
Olympus encouraged users to lock up governance tokens in exchange for its new token OHM.
In theory, reducing circulating supply would stabilize prices and strengthen token value.
Soon, clones popped up everywhere — each promising sky-high APYs and protocol sustainability.
But when OHM’s price collapsed, panic withdrawals began — the classic bank run.
As token prices fell, those promised high yields evaporated too.
DeFi 2.0, meant to solve DeFi 1.0’s weaknesses, ended up proving that tokenomics alone couldn’t fix trust.
6) Who Rescued the Crypto Market From Its Collapse?
By late 2021, both DeFi 1.0 and 2.0 had fizzled out.
The stagnation in DeFi dragged down the entire crypto market, as DeFi had been its key growth engine since the 2020 “DeFi Summer.”
Then came an unexpected hero: NFTs.
In November 2021, during NFT NYC, The Sandbox announced a major investment from SoftBank’s Vision Fund.
This triggered a global surge of interest in metaverse and NFT projects, reviving optimism across crypto.
Blue-chip NFTs like CryptoPunks and Degen Ape Academy skyrocketed in value.
The “hack and rug-pull” scandals were suddenly overshadowed by NFT mania.
By early 2022, the NFT wave lifted the broader crypto market again.
Korean giants like Wemade, Com2uS, and Kakao rushed into blockchain gaming, while Kakao even announced plans for its own NFT marketplace — marking the true crossover between traditional tech and Web3.