The 'liquid mining protocol' spread fast by turning traders into promoters - promising rewards for retweets and shares.
Blinded by the potential for high returns achieved by so many recent DeFi projects, people aren't thinking before investing like they normally would - waiting just one or two days to properly research something is long enough to 'miss the boat' in the fast moving world of DeFi.
Disappearing along with the victims funds is the project's website, social media accounts, their blog on Medium, and every trace that they ever existed.
So - who's to blame? Nobody knows!
Like ICO's at one point - DeFi has reached that phase where "lets give $20 million to strangers on the internet" doesn't immediately sound insane...
Even some 'legitimate' projects have discovered issues.
Scammers with bad intentions aren't always behind a projects failure it could be as simple as code errors as some legitimate projects learned. This happened with 'Hegic' which froze everyone's funds because of a typo. This happened early with only a few thousand invested.
But investors had put $750,000+ into another platform called 'YAM' before bad code that minted excessive tokens in the YAM reservation contract was discovered. The project was a roller coaster as YAM went from $0 to $138 and back to $0 in a matter of days.
Then, earlier this week accusations were made against Swerve (SWRV) claiming that code in the smart contract gave it's anonymous creator the power to pause everything . Swerve promises interest upwards of 250% and now holds over $500 million USD in it's smart contract.
Decentralized Governance argument...
The case the creators of these platforms will make is that they don't matter, because they aren't in control. Token holders vote on what happens next, and majority rule - "Decentralized Governance" has taken the place of the traditional 'team' behind a project.
The problem is, the creators always reserve a chunk of tokens for themselves, they make sure if it's a success they will rewarded, usually generously.
The question the community needs to decide is - can they be both unaccountable for anything that happens after launch, and financially rewarded as long as people continue to use their creation?
Is the deal too good? Anonymous DeFi projects creators get to position themselves to profit if successful, but face no consequences for failure, even if they are the reason for it's failure because something like an error in the smart contract's coding.
A lesson learned, again...
This exact thing happened in the days of ICOs, and eventually people learned not to invest in anonymously founded ICOs. Human nature says it's a bad idea to give millions of dollars to anything where no one is accountable for what happens next.
Does it mean every anonymous DeFi project is bad? Absolutely not.
It does mean we need to remember something we already knew - you're taking a much larger risk investing in anything that hides the names of those behind it.
It sounds so obvious, but there's hundreds of millions of dollars on the move that indicate many have forgotten this.
Mark Pippen
London Newsroom / Global Crypto Press News
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