Liquidity management protocol DefiEdge has blocked all deposits to its strategy contracts made from its user interface on Oct. 14, leaving users scrambling to find an alternative.
On Sept. 30, the protocol’s team announced on X that some strategies would be “delisted.” However, the new deposit block appears to affect all strategies and not just the ones that were mentioned in the post.
Withdrawals from DefiEdge are still functioning as of the time of publication.
According to a statement from a DeFi Edge representative on Oct. 14, the reason for blocking deposits is that “[w]e are transitioning towards B2B [business-to-business] liquidity management and moving away from retail liquidity management.”
The representative clarified that partner exchanges communicated the change and that liquidity providers have been supportive of it. The team has also ensured that users can withdraw directly from partner exchanges and not only from the DeFi Edge user interface, they claimed.
DefiEdge is a decentralized finance (DeFi) protocol used by investors who want to provide liquidity to decentralized crypto exchanges. It automates some of the tasks that liquidity providers have to perform, such as rebalancing their inventories and claiming fees.
The app is integrated with multiple exchanges, including PancakeSwap, Thena, Camelot, Lynex, QuickSwap and others. On Sept. 29 — the day before the DefiEdge team announced it was delisting some strategies — the protocol held over $4.8 million worth of cryptocurrency in its contracts.
Also on Sept. 30, the team announced on X that it was “delisting” some strategies used for the Camelot exchange on the Arbitrum network. It stated that users should withdraw their funds before Oct. 10, as these strategies would no longer be managed after that date.
Source: DefiEdge
On Oct. 4, PancakeSwap on the BNB Smart Chain announced that all of its DefiEdge contracts would be delisted:
“Attention all users: @DefiEdge will stop maintaining all its Position Manager vaults on PancakeSwap from 10 Oct 2024. Please remove your funds from their vaults before that to avoid any issues.”
Two days later, DefiEdge shared the post from its own X account. It added, “We urge you to remove your liquidity using PCS UI before 10th October.”
Despite the warning, many users did not withdraw their liquidity prior to the deadline. According to data from blockchain analytics platform DefiLlama, over $3.6 million worth of cryptocurrency was still locked within DefiEdge’s contracts by Oct. 10. Some users may have been unaware of the announcement, as the app’s user interface made no mention of it during the time period.
As of Oct. 14, every strategy listed on the app’s interface displays a message stating, “You are not whitelisted. Please reach out in the DefiEdge Discord community.”
The strategies affected include those announced in multiple X posts on Sept. 30 and Oct. 8, as well as others that were unrelated, such as those used for QuickSwap, Thena and Uniswap.
Error message on DeFi Edge strategy listing. Source: DefiEdge
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The error message contains a link to the protocol’s official Discord channel. Cointelegraph contacted the team through Discord but did not receive a response by the time of publication.
After publication, the team clarified that whitelisting will soon become available to institutional investors. “We have decided to whitelist deposits on the platform while still allowing withdrawals,” the representative stated. They added that the team is “working with top custodians and market makers building infrastructure that would usher in the next phase of yield management at scale.”
Liquidity management apps have been plagued by exploits in the recent past. On Jan. 22, DefiEdge’s competitor, Concentric, lost $1.8 million when an attacker stole the development team’s private key. The protocol subsequently closed down and never reopened.
On Jan. 4, liquidity manager Gamma Protocol also suffered a $400,000 exploit. However, the team later patched the vulnerability and reopened the protocol.
A Gamma representative told Cointelegraph on Oct. 14 that it does not plan to require users to be whitelisted.
Update 10-14-2024, 7:09 pm UTC: This article has been updated to include portions of a statement from a DeFi Edge representative.
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