DeFi
DEGEN Chain User Loses 90% of Assets Due to Low Liquidity
A Degen Chain user recently suffered a significant loss, losing 90% of his assets, or 785,000 DEGEN, in a cross-chain transaction. This loss was due to substantial slippage caused by low liquidity. The incident sparked reactions from the crypto community, highlighting ongoing concerns about the security of cross-chain transactions.
Liquidity causes slippage
The issue started when the user, known as Tempe.degen, attempted to transfer DEGEN from his original chain to Base. In order for this cross-chain transaction to take place, DEGEN assets must first be converted to ETH on the DEGEN chain.
The asset is then transferred to Base and converted back to DEGEN before being sent to the user’s address. During this process, a shortage of ETH in the DEGEN/ETH pool caused significant slippage, resulting in a substantial loss of assets.
Tempe.degen pointed out that the chain did not use the proper bridge and that the user interface was confusing. These factors contributed to this unfortunate outcome, highlighting the complexities and risks associated with cross-chain transactions. Low liquidity remains a major problem for some pools, prompting DeFi founders to look for solutions to improve the situation.
The platform assumes full responsibility
In response to the incident, the company behind DEGEN Chain acknowledged the issue and assured affected users of a full refund. A spokesperson said, “One of our users lost nearly 90% of their funds during a bridge transfer from Degen Chain to Base. Bugs like this should never happen, especially when user funds are involved. If you have experienced a similar issue, we will create a form to ensure everyone is refunded.”
2/3 Degen L3 is in a difficult situation. We have received terrible service from our suppliers, and apologies are not enough. Outages and loss of user funds are unacceptable, especially from companies claiming to specialize in this field.
— Degen 🎩 (@degentokenbase) July 16, 2024
The platform also highlighted the poor quality of service from providers and took responsibility for the incident. It assured the community that changes would be made to improve the reliability of the platform. These changes will include a restructuring in the coming weeks to provide the best possible service.
This incident highlights the need for improved security measures and liquidity management in cross-chain transactions. As cryptocurrency adoption grows, ensuring investor security and trust is essential to foster broader market growth.
The company’s swift response and promise of reforms are aimed at restoring user confidence and highlighting current challenges in the DeFi space.
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