In today's edition of YIYL, (You Invest, You Lose) we head back to the DEFI space where people think because they have signing rights to a wallet, that they have no custodial risk, but that is anything but the case. Crypto custody is nothing but a story that is based on the true custody that bitcoin provides, and while custody an alt coin has its own risks, that is not enough.
Shitcoiners need to go out and get yield or face dilution in whatever coin they cold and because of this they sign over rights to their coins to different protocols and when you do, you open yourself up to attack.
DEFI has really become a space where it's all about convincing people to place their money into smart contract custodians only to get rugged the same as they would if you had left it with a centralised custodian. At least with a centralised entity, you might get something back, should bankruptcy proceedings go your way.
But with DEFI once you're hacked your shit out of luck, sure there are some cases where funds are returned in nominal value. But by the time that happens the damage to market value has long been done, as well as any liquidity, but this is the risk you take for your moon bags.
Flare token flies too close to the sun
Today we see yet another example of this, on the chain where rugging was made even cheaper. While Ethereum holds the title of premium rug pull tech, if you want to get rugged but don't want to pay high gas fees you're better off using BSC.
Binance shitchain has attracted thousands of low-rent scams over the years and it continues to this day. Exploits and rug pulls of random tokens on BNB Chain are fairly commonplace, but typically the amount of money lost is fairly minimal. Normally between 100k and 5 million, and sure they add up, but very few really make any headlines and people ignore them and continue to risk their funds in the BNB ecosystem.
In this case, Flare token who lord knows wtf they do and how they managed to acquire so many funds, exploiters or insiders were able to siphon 3.9 billion $FLARE from the Flare project, which they swapped for just under $17 million.
The funds were then tumbled as is the usual case with these sorts of things and now the wallet waits to bleed out these funds over time.
https://twitter.com/peckshield/status/1591831184526516226
- peckshield
Lack of liquidity saves the day..I suppose
Prior to the hack, the flare tokens as trading at a pretty high price at nearly $20 and have gone down to pretty much zero and I doubt they will recover. In the landscape, we face where liquidity is at a premium and fear is at an all-time high, if you fuck up now you know it's over.
What this hack does serves as a lesson in liquidity and that tokens don't equate to realized gains. If we had to take the price of the coin at the time of the hack and naively calculate based on the tokens stolen this would have been a multi-billion dollar hack.
$FLARE was priced at around $18.25 before the attack, and if we multiply that by the amount of tokens stolen calculation the theft amount at $71 billion.
However, once dumping began, the lack of liquidity caused the token price to plummet to $0.0000018, and the attacker ultimately ended up with around $17 million.
https://twitter.com/blockchainrulez/status/1592402382180454400
- blockchainrulez
Which is no small amount and is still a healthy return for rugging a project. Not only do the people who held rights to those coins lose their funds but those who were trading them or provided liquidity have now been drained and left with a useless token and this is the nature of DEFI.
You can now scale and spin up ponzis easier than ever and the best part of it all is you have a mindless horde that will promote it for you too. As long as people are willing to fall for the same scam with a different lick of paint, this will continue to happen, and one thing that is not in short supply are retail suckers.
Have your say
What do you good people of HIVE think?
So have at it my Jessies! If you don't have something to comment, "I am a Jessie."
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