Articles

One person unexpectedly found $29 million in DeFi account

DeFi protocol firm Compound Labs unintentionally sent users a total of $90 million due to a programming error. The CEO states that users can keep 10% of the money if they voluntarily return the rest of the undue gains. Such persons will be considered “white hats.”

On account of the way in which blockchain works, Compound Labs cannot otherwise recoup its losses. However, those who do not return the funds could be reported to the Internal Revenue Service. Wrote the company’s CEO and founder Robert Leshner, “Most of you are doxxed.”

How it happened

The $90 million was dispersed on account of a bug. One individual user woke up to unexpectedly find a whopping $29 million in their account. Leshner views the issue of whether or not to return the funds as a moral one for users. 

According to media groups, Leshner appears to be implying that the 10% given to users would not be taxed, provided that the remainder of the funds were returned promptly. According to CoinTracker.io head of tax strategy Shehan Chandrasekra, account holders should not experience any tax issues provided that tokens’ values are reported as income.

 As of Friday, October 1st, two users returned roughly $12 million to the company. By Sunday, October 3rd, some $38.7 million made its way back to Compound Labs. After Leshner’s announcement, social media users expressed deep concern over the notion that their identities could be revealed to the IRS. Many participants in decentralized finance appreciate DeFi’s privacy benefits. 

The state of DeFi

Compound Labs provides the world’s fifth-largest DeFi protocol. In total, the organization supports $10.3 billion. Experts state that Compound can easily absorb the shock of this loss, however the question is whether or not users will be able to take this setback in stride. Will users lose confidence in DeFi? 

One DeFi insider states that an immediate concern for Compound is the fact that the accidentally dispersed tokens were reserved for future rewards. A comptroller ordinarily oversees the pool of cash dolled out as rewards to clients who offer their funds to borrowers at a fixed interest rate. 

“Alchemix [another DeFi protocol] had a similar incident a few months back where they gave out more rewards than intended,” stated developer Mudit Gupta. “Almost everyone who got the extra rewards refunded the extra.”

Since the bug emerged, the price of Compound’s native token fell by nearly 13%. As the issue has begun to resolve, the company has regained old ground. As of Monday morning, COMP is down by less than 3% and the better-known cryptocurrencies, Bitcoin and Etherium, are down by 2.3% and 1.2%, respectively

In conclusion

The total value of assets held in DeFi financial products has nearly reached $175 billion. The future of DeFi might entail challenges and uncertainty, but widespread interest and regulatory guidelines could result in increased consumption of these nascent products and technologies. 

For more information about DeFi, cryptocurrency and cyber security, see Cyber Talk’s past coverage. To receive executive-level cyber security insights, cutting-edge analysis, and robust resources in your inbox each week, sign up for the Cyber Talk newsletter.

Back to top button