The Dangers and Allure of Forks in DeFi: Hackers Exploit Code and Protocols Make Efforts to Shut Them Down

77
2
The Dangers and Allure of Forks in DeFi: Hackers Exploit Code and Protocols Make Efforts to Shut Them Down

An article from The Decentralised newsletter highlights the recent code exploits faced by Stars Arena, a copycat platform of friend.tech. These incidents shed light on the risks associated with investing in forks of popular protocols. While forks may appear similar on the surface, using much of the same code, there can be significant differences in their functionality. A minor exploit initially cost users approximately $2,000, but within 48 hours, hackers discovered a more serious breach that wiped out $3 million of user deposits. The allure of forks, such as friend.tech, stems from the opportunity to replicate its success on other blockchains. However, experts caution that the rewards of investing in forks rarely outweigh the risks.

In other news, the FTX hacker, who stole $450 million from the exchange, has started transferring their stolen funds to Bitcoin via THORSwap, a DeFi exchange on THORChain. This poses significant challenges for THORSwap, which has chosen to shut down its website frontend after consulting with legal counsel and law enforcement. This response may become more common across DeFi platforms as developers strive to demonstrate their stance against criminal activities. However, shutting down websites alone does not deter tech-savvy hackers who can still interact with a protocol's smart contracts directly or through other means.

On a positive note, MakerDAO, a lending protocol, has tripled its profit forecast by leveraging high US bond yields and delivering rewards to holders of its stablecoin, Dai. This strategy has also gained traction among other protocols like Frax Finance. While some oppose integrating real-world assets into DeFi, it is seen as crucial for maintaining relevance to those outside the space. As long as protocols effectively manage the risks associated with engaging in assets like US Treasuries and interest rates remain high, the DeFi sector is expected to continue growing.

Additionally, Ether liquid staking provider Lido has captured nearly 33% of all Ether staked on Ethereum, raising concerns about potential centralization risks for the blockchain. The article mentions the importance of staying updated and joining their Telegram channel for the latest news, community polls, and memes. The author, Tim Craig, holds various cryptocurrencies and an insignificant amount in NFTs.

Overall, the text discusses the risks of investing in forks, the challenges faced by THORSwap due to a known hacker's activities, the success of MakerDAO leveraging real-world assets, and the potential centralization risks associated with Ether liquid staking.