Welcome to Finance Redefined, your weekly dose of basics decentralized finance (DeFi) insights — a newsletter designed to bring you the highlights of the past week.
After a bullish April, May was another month of exploits, rug-pulling and hacking, bringing uncertainty back to DeFi. The most prominent headline in the last week was the Multichain protocol. The delayed upgrade of the DeFi protocol’s cross-chain nodes created a spiraling effect, reducing the price of its token by 30%.
The Multichain protocol saga affected several DeFi protocols and forced Binance to suspend deposits for ten bridged tokens on May 25 after days of stuck transactions.
Multichain aside, hacks, exploits and rug pulls dominated the week. The crypto project reportedly ran with $32 million in customer funds, the DeFi protocol WDZD Swap was hacked for $1.1 million, and a bug in Polygon’s Aave v2 resulted in some assets being frozen in the contract.
The top 100 DeFi tokens had another bearish week with little change from the previous week, with most DeFi tokens trading in the red on the weekly charts.
Multichain token will sink by 30% when backend upgrade is delayed.
On May 24, the cross-chain router’s native MULTI token price dropped 30% in 24 hours and was trading at $4.97, Cointelegraph reported. It has since fallen below the $4 mark. The sell-off occurred after users reported that their multichain funds had not arrived due to a backend node upgrade that was “taking longer than expected.”
At the same time, a wallet address associated with Layer 1 blockchain developer Fantom Foundation reportedly removed 449,740 MULTI ($2.4 million) from liquidity on the SushiSwap decentralized exchange. Rumors also seem to have fueled the selloff. IN tweet viewed more than 300,000 times since publication, one user wrote: “The multichain team is said to have been arrested by the Chinese police and is in control of $1.5 billion in contract funds.” On the same day, blockchain analytics company Lookonchain announced the outflows of MULTI linked with smart money accounts worth at least $3 million.
Binance suspends deposits for bridged tokens and seeks clarity from Multichain team
On May 25, crypto exchange Binance suspended deposits for 10 bridged tokens after days of stuck transactions that fueled uncertainty around the Multichain protocol.
Affected token pairs include Polkastarter (POLS), Alpaca Finance (ALPACA), Travala.com (AVA), Spell (SPELL), Fantom (FTM), Alchemy (ACH), Beefy (BIFI), SuperVerse (SUPER), Harvest Finance (FARM) and DeXe (DEXE). This move impacts users of bridged tokens on the BNB Smart Chain, Fantom, Ethereum, and Avalanche blockchains.
The project kicks off with an alleged exit fraud of $31.6 million
A crypto project called Fintoch — which claimed to be backed by investment bank Morgan Stanley — appears to have launched with nearly $32 million in user funds, according to ZachXBT sleuth.
In the thread, the crypto detective showed a diagram detailing the movement of funds. A detective on the chain claimed that the project had probably committed an escape hoax. The fund promised 1% daily interest for investments from users. However, users of the platform have started reporting that they are now unable to withdraw their funds from Fintech.
DeFi protocol WDZD Swap leveraged for $1.1 million: CertiK
On May 19, the DeFi protocol WDZD Swap was hacked for $1.1 million worth of Binance-Peg Ethereum tokens, according to a May 21 report from blockchain security firm CertiK. Binance-Peg Ethereum Token represents Ether (ETH) bridging to BNB Smart Chain.
According to the report, the attacker made nine malicious transactions that drained 609 Binance-Peg Ethereum tokens – worth $1.1 million at the time of the attack – from a contract associated with the WDZD project.
A bug in Polygon’s Aave v2 causes some assets to get stuck in contracts
A bug in an older version of the Aave cryptocurrency lending protocol prevents users from interacting with Wrapped Ether (WETH), Tether (USDT), Wrapped Bitcoin (WBTC) or Wrapped Matic (WMATIC) pools on Polygon’s Aave v2, preventing assets from being withdrawn from them, according to a May 19 proposal that attempts to fix the bug through a patch. The proposal says that users are currently unable to “supply more of these assets, borrow, repay or withdraw”.
Although withdrawals are currently not possible, the team said the funds are “absolutely safe” as the error can be fixed after a governance vote.
DeFi Market Overview
The overall market value of DeFi saw a slight increase last week. Data from Cointelegraph Markets Pro and TradingView show that the top 100 DeFi tokens by market cap had another bearish week, with most tokens trading in the red. The total value locked in DeFi protocols remained below the $50 billion mark.
Thanks for reading our roundup of this week’s most impactful DeFi changes. Join us next Friday for more stories, insights and education on this dynamic space.
