Hey yo, what is the good word with my people
the who reside in the Chico Baracks & if you’re
a newbie, no stripes yet, your just a viewer
of the tube.
My name is Tyler, the host of the crypto channel,
that provides no escape, and if you try to
leave, something always sits you back right
on your keester.
Kind of like these guys.
Well, let me sit you back into your chair,
as this space is getting oh so wild & crazy,
and reminding me once again of the 2017 madness.
DeFi, Yield Farming, Liquidity pools and the
like...today I wanna dive into these topics,
and not discuss necessarily the good, although
some bright light can be found.
I wanna talk about the BAD, as no one is talking
about it, in the influence space as gains
have once again blinded those with a mouth.
Although, there is an influencer, who should
have the biggest sway of all, but for some
reason, people do not like to listen to the
creator of the 1st & most widely used smart
contract.
Vitalik Buterin, when he speaks I listen...he
tweeted yesterday “I personally am steering
clear of the yield farming space completely
until it settles down into something more
sustainable.
But I'm not particularly a "smart mind in
defi" so....It settles down from the PoV of
people providing their liquidity to collect
coins, it crashes with tears from the PoV
of people holding those coins that are getting
printed nonstop to pay the liquidity providers.
Seriously, the sheer volume of coins that
needs to be printed nonstop to pay liquidity
providers in these 50-100%/year yield farming
regimes makes major national central banks
look like they're all run by Ron Paul.”
And then a David then responds “If you see
those printed coins as new cryptocurrencies
then yes, it's insane.
But if you see them as equity in new crypto
startups/projects that generate cash-flows,
it's not that crazy.
There will always be new startups with real
potential in crypto.
Of which vitalkik replies “But the thing
is, I see no plausible path toward them generating
cash flows.
That requires building applications that generate
fees.
And so far the only strategy toward generating
long-term fees that I see is some kind of
weird financial attack to grab liquidity and
steal network effect from uniswap.
And I'm pessimistic on that strategy.
So Vitalik...he is out on yield farming, not
out on DeFi, but the yield farming craze.
But the thing I wanna talk about, is the thing
he ended it with, “so far the only strategy
toward generating long term fees that I see,
is some kind of weird financial attack to
grab liquidity and steal network effect from
Uniswap’
Well, Vitalik, that is already happening,
the financial attacks to grab and steal liquidity
from Uniswap & they way they are attracting
people is through Yield Farming.
Have you heard of Sushi yet?
Well it touts itself as the evolution of Uniswap,
with the Sushiswap protocol...which has Sushi
tokenomics, which include the release of Sushi
coins to the people who stake liquidity pool
tokens, from Uniswap with them.
AKA, they are forcing a large Uniswap pool
for Sushi, by giving people Sushi rewards
for providing liquidity.
So what is wrong with this?
How is it an attack?
Well nothing harmless to begin, but after
2 weeks, they will be taking the liquidity
staked with their interface, and swap it the
their own Automated Market Making protocol,
and take it away from Uniswap
This is called Vampire Mining & the strategy
is to siphon liquidity from a market leader
like Uniswap by offering incentives and revenue-sharing
tactics that make capital more profitable
on the new protocol, which is just a fork
of Uniswap.
So, should you be looking to roll with Sushi?
Well the contracts for Sushi have yet to be
professionally audited, or audited by any
notable programmer in the Ethereum space.
Although, the contracts are publicly available
& open source & there has been no glaring
holes identified by others in the community….
But, you have to realize, is this….you can
have the best programmers in the world looking
at the code, and they can miss something.
Vitlalik knows about this, and that is why
he is so cautious.
Vitalik, remembers the DAO hack of 2016, which
almost destroyed Ethereum.
So a bit of history lesson for you all, as
this was only just over 4 years ago...and
as we know in crypto things like to happen
in cycles of about 4 years.
The DAO, was one of the most hyped Ethereum
projects, and was able to accumulate over
12.7 million Ethereum or 15 percent of Ethereum
total supply on that day, worth over 5.5 billion
dollars today.
Well on June 16, 2016...the DAO was hacked
and all that Ethereum wen’t bye bye….this
caused a major community split, and the creation
of Ethereum Classic, as the Ethereum network
voted to do a chain split, to recover the
stolen Ethereum, which some in the community
did not like.
Now you wanna know the minds working on the
DAO?
Well April 25th 2016, just under 2 months
before the hack, this blog post was put out
titled “Vitalik Buterin, Gavin Wood, Alex
van De Sande, Vlad Zamfir announced amongst
exceptional DAO Curators”
These are all Ethereum heavyweights & it included
even more, like Fabian Vogelsteller.
Now they all put their name on the DAO, to
become a curator of the network, basically
a sing of approval and as we can see form
the article “Curators are a set of signatories
(usually a multisig) acting as a failsafe
mechanism that indirectly prevent 51% attacks”
So, they were supposed to protect the DAO
network….
But as we know, protection from 51 percent
attacks wasn’t enough, as it wasn’t that
attack launched, but one on exploiting smart
contracts.
And here is the crazy thing too, the DAO went
through a security audit….April 5th, it
is announced Deja Vu had performed a security
audit of the contracts, and the technical
results were even published…
Now, who was the CTO of the company behind
the DAO...slock.it?
This was a Christopher Jentzsch..he was the
technical lead, so he is responsible for the
lack of security and bugs found in the cound...but
Chris who was he working with back before
the hack?
Vitalik….they have a historic conversation
together, in 2015 in which the GO implementation
was decided upon, from a discussion between
the 2.
And then, when the hack happened in June,
Vitalik automatically got on the phone with
exchanges, to discuss what should be done
about the hack...who did Vitalik bring in
to the conversation?
As we can see at 3:12 am...Christopher….
So, the point that I’m trying to get across,
is this was deeply engrained with Ethereum,
Vitalik, Gavin Wood & others, they looked
at the code, and were OK with it...a smart
contract firm, was OK with it...and it still
wasn’t OK.
Now because of this, lessons were learned.
Smart Contracts were forced to go through
a much more stringent audit process, testnets
became a common tool & the amount of firms
performing audits and testing exploded.
But, with the surge of DeFi today, many are
forgetting about 2016, and forgetting about
what was learned.
They are not testing for long enough, they
are rushing code, and they are not getting
it professionally audited.
This is a recipe for disaster, as Solidity,
the smart contract code being used for all
of these DeFi tools is turing complete, with
a wide attack vector & a ton of unessary risk,
if you don’t know what you are doing.
And I’m smelling a v2 of this happening,
as we get a bunch of developers, who are not
smart contract developers, building smart
contracts, for Defi when many of them do not
know what they are doing.
I mean YAM finance, should have been a warning...a
sign, that this is going to happen.
A bug was found, but luckily it wasn’t one
where funds could be drained like the DAO.
Luckily funds were safe….
Then in June of 2020, an exploit was found
with Balancer Labs “Balancer Labs Incident
— When Bug Bounties Fail” ….and a community
developer, actually submitted the bug for
bounty to Balancer 53 days before it happened.
Which Balancer ignored...the submitter ends
his article with “I am publicly disclosing
my bug bounty report now because I believe
in DeFi and want to see it succeed.
For that to happen, we need MORE focus on
security.
We need ROBUST bug bounty programs.
And we need to aggressively acknowledge bugs
and work to fix them BEFORE they are exploited”
Now going to DeFi pulse, the total value locked
in DeFi has surged to over 9 billion dollars,
and as we can see 4 protocols have over 1
billion each...Aave, Maker, Curve Finance,
and Uniswap...now, these protocols are the
top ones, have been audited & have been around
for at least a bit of time...
But getting back to things like YAM, that
protocol came out of nowhere and within 24
hours locked up 500 million...I predict we
will see some DeFi project pop up here soon,
IDK how it will work exactly... but it will
gain hype & get a snowfall of lockups, crossing
1 billion extremely quick.
That is when the hackers will hit…& they
will hit hard…& the thing is that project
could already be out there, that bug could
already be known, and the hackers are just
waiting for the time to strike.
Besides, Vitalik & myself, other well known
Ethereum developers see this coming...Joey
Krug, core developer for Augur tweeted this
“It's definitely summer 2016 v2.
Deja vu!”
And only those who understand what happened
that summer would get the tweet….remember
Deja vu was the firm who audited the DAO contracts.
So, I’m not trying to rain on any DeFi parade
& scare people away from the gains that could
be made in this space.
But, be cautious with these new protocols,
don’t overleverage in anything, and make
sure the smart contracts you are putting your
faith in, have been tested, audited, and tested
again.
Cheers viewers I’ll see you next time!
