A recent DeFi bug in the Compound platform sent the customers digital currencies that were worth nearly $90 million in error. This left the CEO of the creator to beg the users to return those digital currencies voluntarily.
This DeFi bug gives millions to users and this glitch is considered as a black eye for digital currency platforms that are aiming for the traditional system of finance. Decentralized Finance platforms do not have other middlemen or banks who will administer the funds. They instead rely on “smart contracts” that are stock between the users who are completely controlled by computer codes. As per the experts, DeFi is more equal in discarding the traditional financial firms often relying on the fact that “Code is Law” to put importance on the fact that computer codes govern the system better than humans. For this DeFi bug accidentally users get a lump sum amount of COMP.
But experts and critics note that when the code is injected with mistakes, it leads to disaster, and this DeFi bug accidentally million loss is an example. According to Andrew Park, a senior policy analyst,
“There 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. If I have my money in Compound, how much faith am I going to have in that system now?”
The mistake committed by Compound is the latest high profile error in the crypto space. A closely analyzed crypto project backed out for hours in August. In August a hacker abused a vulnerability in another project of DeFi that took tokens that were worth nearly $600 million which was later returned by the hackers. This was known as the Poly Network hack.
The DeFi Bug Fiasco
This week’s fiasco took place on Compound, which is among the several DeFi platforms that enable users to lend out digital currencies and earn interest from them. Unlike similar platforms operated by companies like BlockFi Inc., Compound is not operated by any central company but rather it is operated by a distributed network of consumers using smart contracts. It also distributes a token known as COMP that offers users a decision making power in how the protocol operates.
The trouble began on Wednesday when the users approved an update of the platform of Compound that had a bug. According to a Tweet by Robert Leshner who is the Chief Executive Officer, the bug resulted in too much COMP to go to some of the users. With this DeFi bug accidentally millions of dollars have been transferred to the accounts of the users. But since it is a decentralized platform, and needs a period of waiting, neither the company nor any other user has the control to pause the token’s distribution. The Tweet read,
“A few hours ago, Proposal 62 went into effect, updating the Comptroller contract, which distributes COMP to users of the protocol.
The new Comptroller contract contains a bug, causing some users to receive far too much COMP.”
As per Leshner, the impact was limited to 280,000 COMP whose worth as of 01.10.2021 was $89.3 million. In an interview, Leshner asserted that the mistake portrays that the protocol of Compound requires a long process of review and more developers of the community looking for errors before any change is being introduced. He said,
“This is not an event that calls into question whether DeFi can be operated safely. It’s a wake up call for decentralized, community-run protocols to improve the processes by which changes are introduced.”
While this DeFi bug on Compound does not endanger the funds of the users, it does portray that DeFi probably requires to find other ways to increase the protection of the users before receiving widespread adoption. According to Kevin Werbach, director of the Blockchain and Digital Asset Project at the University of Pennsylvania’s Wharton School.
“The vast majority of people in the world are not going to trust their money to something if they are told a bug will cause you immutably to lose everything. That’s not satisfactory.”