The decentralized finance (DeFi) protocol Compound accidentally made some users “crypto rich” in a bug that was introduced in a recent update.
The what is defi crypto is a cryptocurrency that was created by accident. It has been dubbed the crypto rich.
You can’t create an omelet without breaking a few eggs, and the DeFi market seems to have broken a few flats recently.
Those of you who haven’t yet heard…
For those unfamiliar, Compound Protocol is by far one of the most well-known DeFi lending initiatives, and the latest issue occurred when a normal update resulted in a major flaw in the system, similar to what happened to Facebook yesterday.
Many observers decided to concentrate on Robert Leshner, the founder and CEO of Compound Labs, who put out a very contentious tweet in response to the issue, requesting that customers refund the money or face repercussions. …
Leshner, for what it’s worth, was quick to retract his remarks.
It’s unclear if he threatened to report users to the IRS, or whether he even had the authority to do so.
It’s more probable that he was implying that if individuals cashed out, they’d have to pay taxes, which doesn’t seem like a very effective disincentive.
Compass of morality
The whole story raises some significant philosophical issues about what cryptocurrency symbolizes and why we are interested in it.
A clerk handed me a five dollar note instead of a single when I was eight years old. It took me many agonizing minutes outside the shop to determine that returning the money was the correct thing to do.
Would I have made the same decision if the stakes were in the millions of dollars? Would you do it?
Now factor in the fact that the money being held in the Compound scenario isn’t coming from anyone’s pocket.
The COMP tokens that were erroneously issued originated from the protocol itself, which has a market capitalization of about $10 billion.
The newly released tokens would add to the circulating quantity, thereby diluting the price, which would have a significant effect on other users.
Certainly, selling them on the open market would be a bad idea, but what damage could be done by keeping them for a while? After all, aren’t we here to earn money?
Despite this, and the founder’s rash response, it seems that some individuals have chosen to return the funds. A total of $38.7 million has already been refunded, according to CNBC.
This, however, comes as no surprise to me. In the crypto realm, there is a strong sense of community.
This similar mindset is behind an Ethereum miner who recently refunded an incorrect $24 million mining fee, as well as the now-famous polymath hacker who returned almost all of the $600 million taken in a notorious crypto heist.
The road ahead
Every software has flaws. We witnessed that with Facebook’s record-breaking outage the other day.
Unlike Facebook, however, the individuals who are developing this new and exciting industry have a strong moral compass and are often prioritizing the values of what we’re doing above personal wealth accumulation.
It’s possible that DeFi isn’t quite ready for prime-time finance just yet. The majority of the initiatives are still in the early stages of development, and new economic models are being explored.
But we’re making good progress. The Financial Conduct Authority has brought a new DeFi protocol within its regulatory umbrella, which is a major step forward for the sector. However, there is much more important news from the United States. …
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