DeFi chaos is staged in turn, how can the exchange public chain break through the “earth dog” predicament?

Voluntary pools ran away, coins fell and mines collapsed, team information was accused of falsification, project team mistakes led to smashing tragedies… Recently, all kinds of DeFi projects took turns to be staged in Heco and BSC.

When the user was “injured”, the two public chains initiated by the exchange were also criticized. The focus was on “Why don’t the exchanges review the projects on the chain?” If the question is replaced by “Why doesn’t V God review the Ethereum blockchain?” Project”, I’m afraid it will laugh generously. And when the public chain was crowned with the identity of “exchange”, the accusation was slipping towards rationalization in the public opinion field.

Users with decentralized consensus belief education believe that investors should not attribute the evil behavior of the “Tugou” project to the developers of the public chain network, because they should only be responsible for the safe operation of the chain. In principle, it is impossible and practical. It is also impossible to control what kind of applications can be deployed on the chain.

Those who are unwilling to use public chain standards to evaluate BSC and Heco use the lack of decentralization of these two chains as a spear of attacks, and point out that the two chains belong to Binance and Huobi, and believe that the two exchanges The responsibility of project review shall be fulfilled. The thinking of listing coins on centralized exchanges has become a perspective for some people to examine the public chain of exchanges.

The industry likes to compare the public chain of exchanges with Ethereum. The difference in technical indicators is not fundamental. The essential difference between the two is the gene of ecology. The Ethereum ecosystem is constructed by a group of people who have gradually received training in decentralized governance. This process took 6 years. On the newly born BSC and Heco chains, users in the currency circle who are accustomed to centralized transactions gather.

The trust crisis brought about by the “earth dog” may not be a bad thing. For the exchange public chain, how to gradually pave the road of community governance in the process of transition to complete decentralization is the long-term solution. Some suggestions and explorations Unfolding.

“Tugou” cuts off the trust of the exchange public chain

In less than a week, two suspected malicious projects appeared on the BSC and Heco chains.

On March 4, Meerkat Finance, a project on the Binance Smart Chain BSC, claimed to have been hacked and lost up to 31.5 million U.S. dollars. The project took only 15 hours from online to thunder.

Since then, the blockchain security agency slapped Meerkat Finance and found that the vault contract of the project was a modifiable agency contract, and there was a problem of self-retaining backdoors. The project’s subsequent sale of domain names on the official website for US$10,000 has amplified the suspicion of “cashing money and running away.”

After the incident, the compromised user stated that he had already reported to Binance and requested to block the address of the project party. Someone called the police. Binance co-founder He Yi also replied that the security team of BSC is following up and has contacted a number of security audit institutions.

The turning point is that Meerkat Finance has appeared again, claiming to invite hacker attacks to help users understand the risks of smart contracts. The wording is funny and hard to believe. In the end, under the pressure that Binance put on the other side, the project party returned most of the funds.

BSC just ended the tricky “Dog”, and there was another storm on Heco’s side. On March 10, after the Heco chain project HSO conducted IDO (the first DeFi mining issuance), the official website and the telegram group with active users could not be opened, and 30,000 HT worth 500,000 US dollars were taken away.

After the incident, Huobi came forward and stated that risk control has been carried out and that the user’s assets will not be lost if the project party is urgently contacted.

Since the beginning of this year, problematic projects have frequently appeared on the BSC and Heco chains, and have been denounced by users as “earth dogs” that cut a wave. Such projects appeared on Ethereum on a large scale in the second half of last year, when DeFi was booming due to the liquidity mining model. Nowadays, while the high-yield DeFi applications on the BSC and Heco chains attract users, they have also attracted “earth dogs”.

In the BSC chain multi-issue project volume capital runaway incident, Popcornswap volume reached nearly 48,000 BNB. Recently, Zap Finance, Tin Finance, and SharkYield have all run away. Among them, SharkYield is suspected to have taken away 6000 BNB.

More concentrated on the Heco chain is the problem of project “mining collapse”. Recently, the resetting of project tokens such as MFD, TLO, Book, HBO, etc., are all mine collapses. Some projects have pre-mining or oversold. The bad behavior of HBO is also caused by the mistake of transferring project tokens to the LP mining pool due to Oolong.

A veteran player in the currency circle and a KOL “super king” who has been immersed in the DeFi field for more than half a year, explained that the performance of “mine collapse” mainly has two aspects. It will collapse; another manifestation is that user funds have come in, and the price of the project currency has not risen correspondingly, or even just remained flat, and the yield has dropped sharply, for example, from 100% to 10%, which also means collapse.

Regardless of the main actions of the project party, such as additional issuance or malicious sell-off, “Super Jun” believes that the essence of the collapse of the mine is that the DeFi application and the produced tokens are not recognized by the market. “Many DeFi projects have a big bubble. Mining is just for mining; or the project has a little value and a little demand, but the value is not discovered in a short time, and the mine will also collapse.”

Whether it is the main actions of the project team running off the pool or additional issuance throwing, or the asset loss caused by the project being attacked or the team’s misoperation, it will be attributed to the project responsibility when it is placed on the Ethereum. The target of the user attack is ” “Dog”. When it comes to BSC and Heco, the responsibility is being directed to the two exchanges, Binance and Huobi.

“There are a lot of dirt dogs on BSC, and Binance doesn’t care about it”, “If Huobi solves the problem of dirt dogs, Heco will have to finish playing”… It’s not difficult to find out if BSC and Heco are exposed on the chain recently. “Tugou”, Binance and Huobi will all be scorched by public opinion.

“Super Jun” believes that some users have blurred the concept of the exchange and the exchange public chain. “On the exchange public chain, hackers steal coins or run away. This is beyond the control of the exchange. It can’t help it. Take this responsibility. Now, there are many cross-chain tools on the public chain of the exchange, which can directly cross from the public chain of the exchange to other chains, such as Ethereum. The public chain network can objectively display the asset path, but it does not Power does not have the ability to freeze suspicious assets. With this power and ability, the chain will no longer be a public chain and credibility will be damaged.”

Fuzzing the concepts of exchanges and exchange public chains, users seem to have found a responsible subject who can bear their losses, and objectively they will also twist DeFi and public chains into a situation that does not conform to the rules of blockchain.

Difficult to balance the project side and the user side

Satoshi Nakamoto used the Bitcoin network to establish the basic principles of the blockchain, creating a permissionless, transparent, anonymous, and freely accessible decentralized value circulation network. He hopes that human wealth can be controlled by his own private key. Don’t transfer this right to another party.

The other side of absolute financial autonomy is the responsibilities and risks that people need to bear when controlling and administering finances. For example, if assets are stored securely, they will face fraud and thieves, such as potential losses when using assets to invest.

Ethereum follows the principles of Bitcoin and has spent 6 years paving and continuing to pave the way for a decentralized ecology. Should the public chain of an exchange be forced to break the rules of the public chain when it is affected by the “earth dog”?

In the face of “local dog” getting on the chain, whether to intervene or not to intervene is basically a false proposition for the public chain, but it is a real dilemma for the exchange.

Heco and BSC have become heterogeneous in the public chain market due to the existence of exchange research and development capabilities. They not only have the attributes of an open public chain network that does not need to be censored, but also because the current nodes are not independent and the governance is not sufficiently decentralized. Controversial.

This “not enough decentralization” is affecting the two major groups connected by the exchange’s public chain-application developers and users, which are the main components of the ecology.

For DApp developers who are pursuing anti-censorship, they do not want to be controlled by the chain, whether it is the developer or the application user; and for users who switch from a centralized exchange to the chain, they do not want to encounter If you want to make money safely when it comes to malicious projects, if you encounter a malicious project, the exchange would better come forward as it did in the past.

When bad currency infringes on the ecology, it will damage every role in the ecology, and there are already signs of this. “Our project is under development, and we are also adding to the chain. If the chain is ecologically dirty, users will hesitate to enter the market,” said a DeFi developer.

Therefore, as chain developers, centralized exchanges are caught in a dilemma, and neither the application side nor the user’s interests can be harmed. If the project is reviewed to protect users and the developers cannot be trusted, the application market may shrink, users have nowhere to go, and the ecology is impossible to talk about; if the project is not reviewed, the unpredictable “earth dog” is like an untimely bomb, coming out from time to time to harm users , The funding panic dissipates, and the ecology on the chain will still be destroyed.

When the “Tugou” project took turns to visit BSC and Heco, the transaction frequency of the two chains was declining. The daily transaction number of the BSC chain dropped from a peak of more than 3.22 million on February 19 to more than 2.61 million recently. Heco went from 2. The 3.79 million times during the peak period on the 18th decreased to 2.62 million times, which means that the activity of transactions on the chain is decreasing.

At the same time, the total value of locked positions on the chain (TVL) has also entered a growth bottleneck period. As of March 11, Defistation data shows that the TVL on the BSC chain was US$11.428 billion, close to the peak of US$11.488 billion on February 21. , There is no significant breakthrough in one month. According to data from Defibox, Heco’s TVL on the same day was 6.2 billion US dollars, a decrease of 0.07% within 24 hours, and there was no new high within one month.

Whether it is Heco or BSC, there has not yet been a normal block generation that changed the chain due to the evil behavior of the “earth dog”. Although the nodes on the respective chains are not so independent, the two chains still cling to the “code is law” block chain. The basic bottom line of developers is also based on the guidelines of public chain builders, and each publicly insists that it is impossible to intervene in which projects can be connected to the chain, so as to maintain the decentralization of the governance concept.

The user’s panic couldn’t be ignored, and a more twisted scene appeared.

Binance has helped users on BSC to chase funds from “Tugou” many times, and Huobi jumped out to declare that a certain amount of money project could not run away. Starting from the original intention of centralized exchanges to protect user assets, such an approach is understandable, but it also invisibly deepens the outside world’s perception of “chains belong to exchanges,” and BSC and Heco desperately want to get rid of this perception.

Who will expel the “earth dog”?

In theory, the public chain must have at least the basic characteristics of the Bitcoin network. It should be supported by decentralized and sufficiently decentralized nodes, relying on the reward mechanism to ensure the safe and stable operation of the network, and it is open to everyone without censorship. User identity allows users to enter and exit this “road” freely.

The current BSC and Heco meet some of these characteristics, such as openness, such as no review, but in order to make up for the inefficiency and high cost of use of the Ethereum network, they used 21 nodes to generate blocks on the network consensus and temporarily transferred them. Enough decentralization to ensure safety, speed, and low cost.

The effect is also obvious. The two chains have been launched successively, and they have quickly attracted applications on the chain, meeting the mining needs of users who missed the Ethereum DeFi bonus period. In less than half a year, both chains have exceeded the amount of Ethereum. Fang’s accumulation in the DeFi field in the past 3 years.

The stimulus for acceleration is not only because the exchange’s public chain lowers the threshold for using DeFi, but also because of the blessing of exchange resources, traffic, and brand influence. Both chains have the support of ecological funds initiated by corresponding exchanges, investing hundreds of millions to mine developers and application resources; the traffic of the exchange itself is also shifting from the centralized market to on-chain transactions.

This is a development path of “concentrating power to do big things.” From the standpoint of the exchange, the business boundary has been expanded; from the perspective of the industry environment, it has also expanded the market scale of DeFi, giving applications and users more choices.

However, hidden dangers have also been planted. The exchange public chain ecology is first promoted by commercial entities such as exchanges using their own power. This is the essence of the exchange public chain and Ethereum.

The latter has gradually cultivated a decentralized ecology in 6 years of development, in which the applications and users have been educated by the ecological community to be open source, decentralized, and censored. It is also recognized in the education of the market that there are loopholes in the agreement. Being attacked, there is a risk of high-yield, such education has been ongoing.

From 2017 to 2019, the ICO projects bred on Ethereum went from madness to feathers, which caused countless users of the currency circle to personally try out what is called pie, bubble, and scam. Even when the DeFi is crazy in 2020, Ethereum founder Vitalik publicly reprimanded the scammer project for “leave and don’t pollute the Ethereum ecology”, but it still can’t make the “Tugou” disappear from the Ethereum network.

Is it true that the expulsion of “earth dogs” can only be attributed to the developers and even exchanges of the public chain?

In the eyes of the above-mentioned DeFi application developers, this is a systematic project of public chain community governance, even Ethereum is also exploring, “Their community has a contract bug bounty program to encourage anyone to discover vulnerabilities and prevent potential problems by rewarding them. I think the public chain community of the exchange can consider it.”

One case has already embodied “the power of the masses.” At the beginning of March, a project called AVAT announced that it would be listed on the Heco chain, but some users discovered that the photos of team members in the project’s white paper were taken from online pictures. AVAT interpreted this as a mistake. Another user reported that someone pretended to be Huobi co-founder Du Jun in the project’s telegram group to promote the project, and Du Jun came forward to refute the rumors.

The launch time of this project has been delayed, and it was deployed on the Heco chain after all. However, due to the loss of the credit of the project party, even if it is stated on the official website that “the project has passed security audits and is all open source,” there are very few pledged assets in the mining pool, which has always been regarded by users as a “white prostitute” single currency mining USDT No one cares about Chi, and the project currency has not been launched on a CEX platform.

This was an accidental expulsion of bad coins, and it also left a little room for the public chain community to rectify the “earth dog”.

Every advice from data institutions, media, KOLs, and investors is actually expelling bad coins, such as those tips on not going to the LP pool for high returns, or pre-remind when you find risk problems. .

Defibox, a one-stop DeFi portal, has given first tips on several risky projects. On the eve of the MFD hit, Defibox pointed out that the project had pre-mining. In the early morning of the next day, there was a sell-off phenomenon between the project party and the large address. In addition, some false propaganda and fraudulent auditing projects were also listed on the eye-catching hot calendar section of Defibox’s official website to remind investors.

There are also some suggestions that need to be released. Super Jun believes that the public chain of exchanges can do better in terms of risk control. “Some measures can be taken, such as “lenient entry and strict exit”. For example, nodes can be used in mechanism to achieve better performance than Ethereum. safer.”

Some users advised Heco that the exchange cannot check the funds on the chain, but can initiate the establishment of a multi-party security committee. “There can be exchanges, media, security review agencies, and active users or KOLs to jointly evaluate the project. There is a unified In response to this, the Heco development team stated that they are already exploring governance methods, and will accept users’ suggestions and comprehensively evaluate the feasibility.

The announcement of “Joint Partners Resistance Against Malignant Projects” has appeared on Heco’s official website. The official stated that it will require the ecological project code to be open source, deploy governance contracts to add time locks, and use community governance to restrain malicious projects. Heco and its partners will not support projects that declare excessive auditing, reinitialization, and asset management authority, and will boycott them.

The crisis of trust brought about by the “earth dog” may not be a bad thing. For the newly born exchange public chain, in the process of transition to complete decentralization, it is time to explore the path of community governance. .

Author/ Translator: Jamie Kim
Bio: Jamie Kim is a technology journalist. Raised in Hong Kong and always vocal at heart. She aims to share her expertise with the readers at blockreview.net. Kim is a Bitcoin maximalist who believes with unwavering conviction that Bitcoin is the only cryptocurrency – in fact, currency – worth caring about.