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DeFi Platform ‘Compound’ Mistakenly Distributes $90 Million In Free Tokens To Its Users

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DeFi Platform ‘Compound’ Mistakenly Distributes $90 Million In Free Tokens To Its Users

Christmas came early for some users of decentralized finance platform Compound this week, when a software bug resulted in $90 million in crypto being sent out randomly.

The company’s CEO was left “begging users” to send it back, according to Bloomberg.

DeFi platforms, which have made it part of their perceived mission to try and deplatform traditional banks, will likely draw regulatory scrutiny and lose some favor in the court of public opinion due to the ordeal, which was widely publicized. 

While advocates for DeFi cite code as the word of law, skeptics are quick to point out that this isn’t much of an assurance when the code contains mistakes. 

Andrew Park, a senior policy analyst for Americans for Financial Reform, said: “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?”

Another gaping hole in a DeFi project was exposed back in August, when $600 million in tokens was stolen before being returned by the hacker responsible.

Compound allows “users to lend out cryptocurrencies and earn interest”. It’s run by a distributed network of users that use smart contracts. Its token, COMP, gives users a say on how the protocol works and trades at about $319 per coin.

On Wednesday of last week, users approved an update to Compound’s platform. CEO Robert Leshner then said on Twitter the bug had caused too much COMP to go to some users. He had no way of stopping or pausing the distribution of the tokens due to the decentralized nature of the platform.

The excess tokens distributed were worth about $90 million.

Leshner defended the platform after the incident: “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.”

“Open source, decentralized protocols are early & hard. But every hiccup leads to a more anti-fragile system,” he concluded.

Tyler Durden
Mon, 10/04/2021 – 04:15

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