Around $90 million were wrongly given to users of popular DeFi staking protocol Compound, a DeFi bug was responsible for this when an upgrade went grossly wrongly.
Robert Leshner pleaded users in a tweet with a few threats to incentivize the voluntary return of the platform’s crypto tokens.
The news of the bug triggered the price of Compound’s native token which plunged nearly 13% in a day, though it managed to recover later.
According to blockchain security researcher Mudit Gupta, “Alchemix [another decentralized finance, or DeFi, protocol] had a similar incident a few months back where they gave out more rewards than intended. Almost everyone who got the extra rewards refunded the extra.”
What is DeFi?
Since the 1980’s cryptocurrencies have innovated with advancements in cryptography. Bitcoin being the first prominent currency of them all, yet the financial services for it have appeared slowly. This is mostly due to the inherent lack of stability and adoption. While mainstream institutions don’t accept Bitcoin loans due to its significant price volatility, making it a poor asset to plan any investment accurately.
As things change quickly in the crypto space, Decentralized Finance(DeFi) is the current trend. DeFi is like financial applications built on blockchain technologies, typically using smart contracts. These smart contracts are automated enforceable agreements that do not need intermediaries to execute and can be accessed by anyone with an internet connection.
It consists of applications and peer-to-peer protocols developed on decentralized blockchain networks. These require no access rights for easy lending, borrowing, or trading of financial tools. Most of the DeFi applications are built today using the Ethereum network, though many alternative public networks are emerging that deliver superior speed, scalability, security, and lower costs.
What Was the Problem?
DeFi protocols like Compound are designed to recreate traditional financial systems such as banks and exchanges using blockchains enriched with self-executing smart contracts.
The Compound on Wednesday, rolled out, was a regular upgrade. Though soon after its implementation, something had seriously gone wrong.
Lesher said, “The new Comptroller contract contains a bug, causing some users to receive far too much COMP.”
“There are no admin controls or community tools to disable the COMP distribution; any changes to the protocol require a 7-day governance process to make their way into production.”