The failure had its origin in the “overrun” system of the Soft Yearn Finance contract. The trader plans to donate USD 10,000 of what he earned to some initiative on Gitcoin.
The fever of decentralized finance (DeFi) platforms is growing as new flaws emerge that lead their users to lose their funds. One of the most recent was the failure of the DeFi project Soft Yearn Finance (SFYI), which began after the price boom on Yearn Finance (FYI).
Twitter user @A_mplify claimed to have caused the loss of almost all available liquidity in the SFYI contract in early September. An error in the SFYI contract gave him more than 740 ETH (cryptocurrency native to Ethereum).
He also alleged in his post that he was not aware of what was happening. He explained that he just took an opportunity in the user interface of the DeFi Uniswap platform, where SFYI is listed.
The trader stated that on that same day, he bought 0.5 ETH worth of SFYI through Uniswap. After having tripled his investment, he sold it, and then he put 0.5 ETH back into the token.
After that, he observed that the platform reflected more than 15,000 tokens equivalent to 747 ETH (around USD 250,000 at the time of writing this article) in his wallet. He thought that it was a mistake and that he would fail to send that transaction, but he did not.
Liquidity Redistribution to Maintain Price on YFI
The failure happened in the “overrun” system that modifies the circulating supply of the token to keep its value stable compared to YFI, according to the developers of the project. The idea is that SFYI is always equivalent to 0.0003 YFI.
The system burns tokens if the price is falling or inflates the supply if the opposite occurs, depending on the fluctuation of the price. The problem is not only that it seems to be dangerous, but also that SYFI holders do not own their private keys. The creators of the project say that this process repeats every 24 hours.
It was inevitable that this would happen, as the user claims. He considers that, if he had not done it with his transaction “of 500 gwei (processing fee), someone else would have done it (and probably did) with 490 gwei”.
The day after that, the team behind this DeFi project announced their position. They briefly stated on Twitter that they would recreate the SYFI token, redistribute the amounts that the wallets had before the error, and add a total of 250 ETH to liquidity. Finally, they said that they would correct the error in the override system that allowed the loss of funds.
Soft Yearn requested support in identifying the person responsible, for which they offered a “large sum of ETH” as a reward. Following the statements of the person involved, the creators of the platform have not issued a new communication.
Failures and Lost Funds in DeFi
This error is not the only case, since the proliferation of similar projects has been such that system failures have become common. For example, an error in the code affected YAM, blocking about USD 750,000 in tokens under its contract.
The user stated that he plans to donate USD 10,000 of what he obtained, which was “easily available and eager to get lost” to some cause on Gitcoin that needs financing.
Finally, he recommended that users not let such risky projects with few guarantees to carry them away. “I hope that we can investigate and invest in safer things next time,” he concluded.
By Alexander Salazar