dYdX, a decentralized finance (DeFi) protocol, recently experienced a significant loss of $9 million in insurance funds. Many suspected it to be an exit scam, but founder Antonio Juliano shared some findings of the investigation on social media platform X (formerly Twitter).
No Compromise on dYdX Chain
Juliano clarified that the actual dYdX chain was not compromised in the incident. The $9 million insurance claims occurred on the v3 chain, which is used to fill gaps in liquidation processes in the YFI market.
Juliano emphasized that dYdX has no plans to negotiate with the attackers. Instead, the protocol will pay bounties to those who provide the most helpful information in aiding the investigation. He also mentioned that significant progress has been made in identifying the attacker and that the information will be reported to the FBI.
Potential Causes Behind the Compromise
Juliano pointed out that the v3 chain, which was exploited, has central components that may have contributed to the compromise. This security incident caused a 43% drop in the Yearn.finance token on November 17, raising concerns within the crypto community about a possible exit scam.
He also clarified that the recent insurance fund incident occurred on the v3 chain and not the dYdX chain. The dYdX Chain, which does not have central components, is separate from the v3 chain. Understanding this distinction is crucial in comprehending the actions taken by dYdX in response to the incident.
Impact on YFI Token
The exploit on November 17 targeted long positions in YFI tokens on the exchange, resulting in the liquidation of positions worth nearly $38 million. This played a significant role in the price drop of the YFI token, which led to a loss of over $300 million in market capitalization. The incident further fueled speculation about an insider job.
dYdX's Approach to Security Breaches
This incident highlights the ongoing issue of security breaches in DeFi. However, dYdX is taking a different approach by involving the community in finding the culprit instead of offering a direct bounty to the exploiters.