Welcome to the latest edition of Cointelegraph’s decentralized finance newsletter.
It’s been a tumultuous week of doxxing, hacks, bailouts and new highs in the decentralized finance space. Read on to recap the most impactful stories of the last seven days.
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Wonderland lost in no mans amid Sifu saga
Following the revelatory identification of previously anonymous QuadrigaCX co-founder Michael Patryn as the founder of DeFi protocol Wonderland — known on social media as @0xSifu — a subsequent community vote decided upon the permanent closure of Wonderland for outstanding security concerns.
The saga commenced when DeFi investigator Zachxbt doxxed Patryn to be Sifu, a figure with a notorious reputation within the digital asset space for alleged fraudulent and illicit activity, most notably regarding the $145-million losses incurred at Canadian-based cryptocurrency exchange QuadrigaCX in December 2018.
Having been made aware of Sifu’s real identity one month prior to this week’s announcement, Daniele Sestagalli, co-founder of Wonderland and stablecoin protocol Abracadabra, posed a crucial question to the community members: “Do we wind down or continue to fight for the aspect of an investment DAO being a revolutionary new organization?” Sestagalli stated his personal preference to be the latter, to fight.
From a technical perspective on Jan. 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 substantially to $78.57 million on Jan. 25, marking an 89.9% demise. At the time of writing, the figure has somewhat recovered to $408.59 million.
In true Web3 style, the decision to “Wind down Wonderland and give the treasury back to its holders” was put to a community snapshot vote. The two-day governance participation resulted in a split decision, an inconclusive majority with 116,000 TIME tokens allocated to the decision of no, and 95,000 to yes.
In response to this, co-founder Sestagalli assessed that “the duty of the team is to enact the will of the token holders. As the vote is so close to 50/50 there is only one path forward, it is to reimburse/unwind,” confirming this in a follow-up tweet.
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Wonderland experiment is coming to an end. It is clear from the vote that the community is divided. The core and heart of Wonderland is still the community. If we cannot find agreement on wether to continue or not, it means that we failed.— Daniele never asks to DM (@danielesesta) January 30, 2022
Discussions within the community are vehemently ongoing in a bid to find an accommodating solution to the Wonderland saga for all involved. Proposals currently at the forefront are a merger with Abracadabra or a transition to a DAO structure with greater transparency.
Wormhole exploited for $321M, parent bails it out
DeFi bridging protocol 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 hack in the history of decentralized finance behind Poly Network’s seismic $610-million breach in August 2021.
Wormhole is known within the industry for its cross-chain token bridge service in which users can transfer crypto assets between chains such as Ethereum, Solana and Polygon, among others, without interacting with centralized exchanges.
After analyzing blockchain data, it was uncovered that the attacker minted 120,000 wETH on Solana and then proceeded to redeem 93,750 wETH for Ether (ETH) worth $254 million. The remaining wETH was swapped for Solana (SOL) and USD Coin (USDC) on Solana.
Following on from this, the hacker utilized a portion of the funds on an asset-buying spree that 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 pledged to the community that the token supply, in addition to the one-to-one backed asset total, would be fully reinstated and is offering a generous whitehat bug bounty reward to the malicious entity for full recompensation of the funds.
The hack risked serious cascading ramifications for protocols and platforms within the Solana ecosystem that rely on the wETH supply for collateral. If their assets were not backed with wETH, investors would have been unable to utilize the service, perhaps lose confidence, and, therefore, short the asset. Solana fell around 13% in the fallout of the news.
In a fortuitous turn of events, Wormhole’s parent company, Jump Crypto, stepped in to bailout the platform and restore all lost funds, an action confirmed by Wormhole in a tweet.
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All funds have been restored and Wormhole is back up.
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