Welcome to the latest edition of Cointelegraph’s decentralized finance newsletter.
It’s been a tumultuous week of doxxing, hacks, bailouts, and new heights in the decentralized finance space. Read on to recap the most impactful stories from the past seven days.
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Wonderland lost in no mans in the middle of the Sifu saga
Following the revealing identification of previously unnamed QuadrigaCX co-founder Michael Patryn as the founder of the DeFi protocol Wonderland – known on social media as @0xSifu – a subsequent community vote decided the shutdown Permanent Wonderland for exceptional security concerns.
The saga began when DeFi investigator Zachxbt doxxed Patryn to be Sifu, a figure with a notorious reputation in the digital asset space for alleged fraudulent and illicit activities, including in relation to the $145 million loss. suffered at the Canadian-based cryptocurrency exchange QuadrigaCX in December 2018.
Having been made aware of Sifu’s true identity a month before this week’s announcement, Daniele Sestagalli, co-founder of Wonderland and stablecoin protocol Abracadabra, posed a crucial question to community members: of an investment DAO being a revolutionary new organization? Sestagalli has stated his personal preference to be the latter, to fight.
From a technical standpoint, on January 15, Wonderland recorded a near-all-time high of $776.64 million in Total Value Locked, or TVL. However, as a consequence of the exposure, the TVL figure dropped significantly to $78.57 million on January 25, marking an 89.9% disappearance. As of this writing, the figure has recovered somewhat to $408.59 million.
In true Web3 style, the decision to “shrink Wonderland and return the treasure to its owners” was put to an instant community vote. Participation in the two-day governance resulted in a split decision, an inconclusive majority with 116,000 TIME tokens allocated to the no decision and 95,000 to the yes decision.
In response to this, co-founder Sestagalli felt that “the duty of the team is to enact the will of the token holders. Since the vote is so close to 50/50, there is only one way forward is to repay/unwind,” confirming this in a follow-up tweet.
The Wonderland experience is coming to an end. It is clear from the vote that the community is divided. The core and heart of Wonderland is always the community. If we can’t agree whether to continue or not, it means we failed.
— Daniele never asks the DM (@danielesta) January 30, 2022
Discussions within the community are vehemently underway in an effort to find an accommodating solution to the Wonderland saga for everyone involved. The proposals currently at the forefront are a merger with Abracadabra or a transition to a DAO structure with more transparency.
Wormhole tapped for $321 million, relative bails out
Bridging protocol DeFi Wormhole suffered a significant security exploit on its network this week to the tune of 120,000 Wrapped Ether (wETH) tokens, equivalent to $321 million at the time of impact – the second largest hacking the history of decentralized finance behind Poly Network. seismic breach of $610 million in August 2021.
Wormhole is known in the industry for its cross-chain token bridging service where users can transfer crypto assets between chains such as Ethereum, Solana, and Polygon, among others, without interacting with centralized exchanges.
After analyzing the blockchain data, it was discovered that the attacker had minted 120,000 wETH on Solana and then continued to exchange 93,750 wETH for Ether (ETH) worth $254 million. The remaining wETH was traded for Solana (SOL) and USD Coin (USDC) on Solana.
Following this, the hacker used some of the funds on an asset buying spree which included SportX (SX), Meta Capital (MCAP), Finally Usable Crypto Karma (FUCK) as well as the highly anticipated soon-to-be-released asset , Bored Ape Yacht Club Token (APE).
In response, the Wormhole team promised the community that the supply of tokens, in addition to the total one-to-one guaranteed assets, would be fully restored and offer a generous whitehat bug bounty reward to the malicious entity for a full clearing of the fund.
The hack risked serious cascading ramifications for protocols and platforms within the Solana ecosystem that depend on the supply of wETH as collateral. If their assets were not backed by wETH, investors would have been unable to use the service, possibly losing confidence, and as a result selling the asset short. Solana dropped about 13% in the fallout from the news.
In a fortuitous turn of events, Wormhole’s parent company, Jump Crypto, stepped in to bail out the platform and restore all lost funds, an action confirmed by Wormhole in a tweet.
All backgrounds have been restored and Wormhole is back.
We deeply appreciate your support and thank you for your patience.
— Wormhole (@wormholecrypto) February 3, 2022
Despite a resolution for affected users of the platform, concerns remain over the whereabouts of the $321 million in lost funds, in addition to the hacker’s intentions in the marketplace.
Ethereum hash rate hits new ATH in PoS transition
Quantitative insights from popular data aggregation site Glassnode revealed this week that Ethereum’s hash rate hit a new all-time high of 1.11 petahash per second (PH/s) on January 28, surpassing the previous figure. of 1.08 PH/s established just 15 days before.
Fluctuations in the hash rate of proof-of-work (PoW) networks such as Bitcoin and Ethereum are prime indications of additional nodes joining the network, scenarios that ultimately result in increased security and further network decentralization.
The previous ATH of 13,076,339,792,989,700 was observed on January 23, 2022
View metric: https://t.co/s9t4z96wMA pic.twitter.com/Cxk3JMg1Qp
— glassnode alerts (@glassnodealerts) February 1, 2022
In December 2021, participants on the Ethereum network implemented the Arrow Glacier upgrade, an initiative designed to delay the activation of a coding mechanism intended to stop the production of mining activity on the network, otherwise known as the “difficulty bomb”.
Ethereum’s transition to PoS is widely expected to occur in the second half of 2022, with Arrow Glacier being the final upgrade, market sentiment acknowledged by one of the main developers facilitating the upgrade, Tim Beiko, during a recent comment.
Analytical data reveals that DeFi’s total locked value edged up 8.87% over the week to $109.92 billion, attempting to recover from the market downturn in recent weeks.
Tezos (XTZ) recorded the highest score in the top 100 following its partnership with Manchester United at 31.60%. Maker (MKR) came in second with a respectable 25.54% gain, while Convex Finance (CVX) saw a 19.46% increase. Curve DAO Token (CRV) and Oasis Network (ROSE) gained 15.29% and 11.79% respectively.
Interviews, reports and other cool stuff
Thanks for reading our roundup of this week’s most impactful DeFi developments. Join us again next Friday for more stories, ideas and education in this dynamically evolving space.