In today's edition of YIYL (You Invest, You Lose), we move back to the DEFI space where apparently you're meant to be safe from centralized contagion but while not true, you're also taking on even more risk. The DEFI space in October online was subject to over half a billion in losses and that doesn't seem to be slowing down anytime soon.
When your funds are only secured by code and no proof of work, that means you have far less security and it's only up to the manipulation of code and not the energy to attack your funds. Then when you build derivates and platforms on top of that kind of network, you're only building on a house of sand.
Once there is enough of a kitty that it would make it worth someone's time to look for vulnerabilities, you're always going to be in danger. I think that's why no single DEFI protocol will ever reach any size of the critical scale and it will always be a fragmented landscape.
The assumptions of DEFI
That is not to say that is bad, it's just because no DEFI protocol can hold any substantial value or it will become a target for attack. That is not to say having different services makes it more secure it just means hacks and attacks can be contained to certain smart contracts.
Now shitcoiners will tell you oh we're learning from all these hacks and building more robust systems, and oh these certain ones haven't been hacked yet so we're fine, but how long can those assumptions hold water is my concern. How many times do these services need to be broken into and cleaned out before you can admit this is not how to safely secure any value online.
Today we have yet another example of how DEFI simply cannot be trusted with funds, in the form of DeFiAI.
What is DeFiAI?
DeFiAI claims that it has an AI bot that can execute on-chain trading strategies, and multi-strategy, and serve as a high-return intelligent aggregator for DEFI2.0.
Intelligently complete DEFI mining, capture high-yield mining from time to time, and automatically complete compound interest, generating ultra-high profits. DeFiAI supports trading and the automated portfolio management of the tokens on the Bsc blockchain and other EVM-compatible systems.
Now for how smart and decentralised it is, shouldn't it be able to secure funds, that is the minimum requirement don't you think?
DeFiAI gets drained
That same day, the project announced the launch of a new website for their project, it also had to eat humble pie and admit that they had also been hacked.
"Our contract has been hacked and has caused a lot of losses," wrote DeFiAI simply in their announcement.
The total funds stolen appear to be around $4.17 million, according to an analysis by SlowMist.
Not much has been reported on how the hack happened, if there is a recovery process or what they plan to do to plug the gap, and I don't think anyone really cares at this point. $4 million while a lot of money for the average pleb like myself seems like pocket change when you look at the billions blown up in the lasy year alone.
https://twitter.com/DeFiAiOfficial/status/1591783217040064513
- DeFiAiOfficial
Talk about the price
In the last month, we've seen the token price tumble from around $0.005 cents to $0.0008209. The token has been in decline since the hack and isn't showing any sign of recovery. It's already a pain for anyone holding the token, who bought in at the high of 0.10 cents in October but having a 99% decline in your token price must be tough to swallow.
Sure bitcoin and shitcoins have all lost 75% or more of their value since the all-time high, but 99% is not something many projects recover from and they either die out or they limp along until they are totally bled out and go out in a whimper.
If you are still putting your money into DEFI protocol tokens or providing liquidity hoping you're going to hit the big time, you clearly have a taste for risk or you're pretty brain-dead. I say go ahead, blow up your portfolio, and hand it over to someone else who is going to rug you fast or slow, but rug you they will.
Sources:
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