The DeFi craze continues as new cryptocurrencies enter the market. The first few that started everything were Compound (COMP) and Yearn.Finance (YFI). The latter is a token that skyrocketed nearly 100,000% in two months, even though its CEO Andre Cronje affirmed that it was “completely valueless 0 supply token” with “0 financial value.”
Now, SushiSwap is one of the latest hottest DeFi coins, an upgrade of the extremely popular Uniswap exchange. Sushi has generated so much hype that it got listed on a major exchange right away. In fact, Binance listed this digital asset and even added it to its futures trading platform offering 50x leverage. However, the move was heavily criticized by the crypto community.
Scam exchange scamming again! Here we are, fake money futures to fake #DeFi coins! Once you lose everything don’t cry! Hey @binance maybe fix your platform before launching new contracts! @cz_binance I did not forget you soon I see ya in court! https://t.co/xBO9LsJLGA
— Hawk / Trading Plex (@TheCryptHawk) September 3, 2020
Furthermore, Quantstamp, a Blockchain security platform has recently performed a security review for SushiSwap stating that ‘2 medium risk issues’ and ‘3low risk issues’ were found during testing. The most severe ones include a problem in the code where ‘add()’ doesn’t prevent the same LP (Liquidity Provider) token from being added more than once.
The second finding shows that the migrator can be set to any contract which would potentially allow someone to steal the funds, especially if the private key of the owner is compromised.
Finding #1 from MasterChef.sol
add() does not prevent the same LP token from being added more than once.
If a token is mistakenly added more than once, it would reset the rewards variables associated with the token (e.g., accSushiPerShare).
— Quantstamp (@Quantstamp) September 2, 2020
The levels of speculation around DeFi has everyone joining the space. Indeed, the head of Tron Justin Sun announced the launch of Genesis Mining. The TRX pool already has over 5.5 billion coins locked up, representing roughly 8% of the current supply.
The so-called “Ethereum killer” has experienced a significant boost in value and continues trending upward despite the overall market correction. Additionally, TronFi was also launched with the addition of Pearl.Finance, which is trading at around $4,000 and TAI, which is up by more than 3,000%.
Is this new trend bad for the cryptocurrency market?
The founder of one of the most popular DeFi projects, Yearn.Finance, has actually stated that YFI tokens are ‘worthless’. This is quite notable considering that YFI continued surging hitting an all-time high of $38,883. The main idea behind most of these DeFi coins is to deposit/stake or provide liquidity for them and earn a specific token in return.
Many people consider this somewhat of a Ponzi scheme as they are creating money out of thin air. Critics are saying that eventually DeFi projects will simply collapse but not every startup is doing the same.
Some projects have failed already, Yam Finance had over $500 million worth of tokens locked inside. A bug in the smart contract reportedly made the price of the token collapse even though the tokens locked up were not affected.
Others continue thriving, Hotdog token saw an impressive price boost from $5 up to $6,200 in basically 24 hours. Similarly, ‘Pizza token’ had a notable pump to $1,100 but also plummeted eventually. Other DeFi projects with ridiculous names include Kimchi Finance or Zombie token.
KIMCHI is becoming one of the most popular already with $41 million trading volume over the past 24 hours and a price of $1.49. The massive increase in trading volume thanks to these coins has boosted the total volume of Uniswap by a lot putting the exchange close to $1 billion overall volume per 24 hours.
There are many inherent risks with the main concepts behind these DeFi projects. A recent tweet by @Cryptoyieldinfo underlined the problems with the system and how someone can take advantage of it to earn over 250% APR. According to the tweet, it only takes 4 simple steps, buying Ethereum, depositing it to ‘yETH’ to earn 100% APR, collateralize ‘CREAM’ tokens and borrow a stablecoin to earn 200% on curve/vault.