On Sunday, a five-year Cardano holder accidentally lost more than $6 million in ADA after using an illiquid trading pool to swap into stablecoins.
The user was attempting to swap $6.9 million of ADA into USDA (Anzens) - a stablecoin on Cardano with a market cap of only $10 million dollars.
After the swap completed, the user was left with only ~$850,000 worth of USDA.
The price of USDA spiked to $1.08 as the trade went through, a juicy opportunity for arbitrage traders.
The Double-Edged Sword of Irreversibility
In TradFi, transactions can be reversed by a middle-man, such as your bank.
In the world of crypto though, you are responsible for your funds, and botched DeFi transactions cannot be reversed. This is the price of decentralization.
Irreversibility is a feature of crypto, not a bug. All transactions are permanently etched into the blockchain. There is no middle-man who can block transactions, freeze your account, or fix your mistakes.
As they say, with freedom comes responsibility.
Preventing Loss
Let this poor user's mistake serve as a reminder as to why we need to be cautious when broadcasting transactions.
Always be sure to double (and triple) check the amount you are sending, and the destination address.
In the case of DeFi swaps, always confirm that you will be receiving the amount of tokens expected. In this case, the user should have seen the amount of USDA they were to receive, but accidentally proceeded anyway.
You can use something like Coinmarketcap's converter to make sure you are getting a decent deal when swapping between two tokens.
Until next time...
It is crucial to check your transactions carefully in the world of DeFi, because there is no one you can call to reverse a botched transaction.
If you learned something new from this article, be sure to check out my other posts on crypto and finance here on the Hive blockchain. You can also follow me on InLeo for more frequent updates.