So just how many times will we repeat this - Crypto loses 63% due to coding error

jbusse · Dec 17, 2023

Sounds similar in spirit to what happened at Knight Capital (basically software glitch that went haywire). Well documented here at ET (search in the August 2012 timeframe). Some ETers claim to have made many tens of thousands of $ trading against the wayward software. If I remember correctly, the old "opening orders" strategy (or something similar) worked very well. Note that the SEC decided they wouldn't bust most of the trades, which ultimately led to the demise of the firm.

Sprout · Dec 17, 2023

gwb-trading said:
Once again -- a system failure leads to huge losses. This is what a unregulated market with no standards, no insuring & clearing institutions, and no oversight leads to.

Yearn Finance Hit by 63% Treasury Loss Due to Script Glitch
https://www.tradingview.com/chart/Y...Hit-by-63-Treasury-Loss-Due-to-Script-Glitch/

Yearn Finance experiences a major treasury loss due to a multisig script error, leading to new safety measures and community outreach.

In a significant setback for Yearn Finance, a leading player in the decentralized finance (DeFi) sector, a script malfunction in its multisig (multi-signature) system led to a substantial loss of its treasury assets. The incident on December 11 resulted in the unintended swap of Yearn’s treasury balance, amounting to a loss of approximately 63%.

The company confirmed that the loss affected only the treasury funds and did not impact customer funds. The mishap involved the accidental exchange of 3,794,894 lp-yCRVv2 tokens from Yearn’s treasury. This transaction, executed on CoW Swap, led to significant market slippage due to the large volume involved, further exacerbating the loss.

Yearn Finance Treasury Error Triggers Huge Loss

The event unfolded as a result of multiple oversights in handling the treasury funds. Yearn’s statement explained that the entire treasury balance, including fees, was mistakenly transferred to a trading multisig, initiating over 30 trade orders. Among these was the critical swap of the treasury balance.

This transaction’s complexity and high volume of trades hindered effective human review, allowing the error to pass unnoticed. The protocol identified that the script used for token swapping lacked adequate output checks and contained a logical flaw. This flaw failed to cap the trade size, leading to the unintended large-scale transaction.

New Safety Steps at Yearn Post Loss

Yearn Finance has implemented several measures to prevent a recurrence in response to this incident. The protocol plans to segregate protocol-owned liquidity (POL) funds into separate entities and enhance its trading scripts to produce more comprehensible output messages. Additionally, it will enforce stricter price impact thresholds during trades.

This incident is not the first security challenge Yearn has faced. Earlier in the year, the protocol was the target of an attack where a vulnerability in a Yearn vault was exploited, resulting in the theft of approximately $11 million in stablecoins. The attacker utilized a small amount of tether (USDT) to mint a vast quantity of yUSDT. This Yearn-equivalent token was exchanged for stablecoins, culminating in a significant financial loss for the protocol.

Yearn Finance has reached out to the community, appealing to those who profited from arbitraging the mistake to return a reasonable amount to Yearn’s main multisig wallet, ychad.eth. This appeal highlights the collaborative and self-regulating nature of the DeFi community.
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After Andre left Yearn, hard to imagine they'll ever recover - then again his long awaited project on Fantom hasn't held up very well either.

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So just how many times will we repeat this - Crypto loses 63% due to coding error

jbusse

Sprout