A bug in a recent update of decentralized finance platform Compound sent users nearly $90-million-worth of cryptocurrency in error, leaving its creator\u2019s CEO begging users to voluntarily send it back.<\/p>\n
The glitch is a black eye for cryptocurrency platforms hoping to upend the traditional finance system. DeFi platforms don\u2019t have banks or other middlemen administering funds, instead relying on \u201csmart contracts\u201d struck between users that are governed completely by computer code.<\/p>\n
Proponents say DeFi is more egalitarian in cutting out traditional firms, often using the mantra \u201cCode is law\u201d to emphasize that computer code, rather than fallible humans, governs the system.<\/p>\n
But critics note that when the code has contained mistakes, it\u2019s led to disasters for users.<\/p>\n
\u201cThere are reasons to criticize the existing banking system, but there are a lot of safeguards in place to prevent these kinds of things from happening,\u201d said Andrew Park, a senior policy analyst for Americans for Financial Reform, an investor advocacy group that\u2019s been a critic of many crypto projects. \u201cIf I have my money in Compound, how much faith am I going to have in that system now?\u201d<\/p>\n
The Compound mistake is just the latest high-profile error. A closely watched crypto project blacked out for hours last month. In August, a hacker exploited a vulnerability in another DeFi project to take around $600-million worth of tokens which the hacker later returned.<\/p>\n
This week\u2019s fiasco occurred on Compound, one of several DeFi platforms that allow users to lend out cryptocurrencies and earn interest. Unlike similar platforms run by companies such as BlockFi Inc., Compound isn\u2019t run by a central company but rather by a distributed network of users utilizing smart contracts. Compound also distributes a token, called COMP, that gives users a say in how the protocol works and whose price on Friday was about $319 per coin.<\/p>\n
The trouble started Wednesday, when users approved an update to Compound\u2019s platform that contained a bug. Compound Labs Inc. Chief Executive Officer Robert Leshner on Twitter said the bug caused too much COMP to go to some users. But since the platform is decentralized and requires a waiting period, neither his company nor anyone else had the ability to pause distribution of the tokens.<\/p>\n
Leshner said the impact was limited to 280,000 COMP tokens, which on Friday were worth about $89.3 million (R1.3 billion).<\/p>\n
After Compound users claimed the erroneous tokens, Leshner on Twitter threatened to reveal their identities to the Internal Revenue Service if they didn\u2019t return most of them. He later apologized for the threat.<\/p>\n
\u201cOpen source, decentralized protocols are early & hard. But every hiccup leads to a more anti-fragile system,\u201d Leshner wrote.<\/p>\n","protected":false},"excerpt":{"rendered":"
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