The crypto ecosystem was rattled this week with the first two exploits of decentralized finance platforms. The world’s most popular one, MakerDAO, has gone into defensive mode as a result.
Crypto FUD Surfaces Again
As usual the media has run with the FUD spouting headlines of crypto hacking and DeFi fear to boost their page views.
Nothing was hacked and there is no reason for fear and doubt . A wily trader simply exploited a vulnerability in the system to execute a flash loan and arbitrage attack to profit from low liquidity markets.
Some industry experts have suggested that this could actually be a good thing for Ethereum as it highlights what is possible in this new founded financial landscape.
The world’s largest DeFi project, MakerDAO, has now become a target itself as the community is put on high alert.
MakerDAO Goes Defensive
The decentralized lending platform currently dominates DeFi markets with 57.5% market share according to defipulse.com.
Concern has been growing over the possibility of a bad actor controlling a large amount of the MKR token being able to manipulate the collateral of pull off a similar flash loan exploit.
At the moment the big MKR crypto pots are controlled by public facing venture capital firms that have a vested interest in the success of the project, not its demise.
The head of community development at MakerDAO [@richatmakerdao] has been posting updates from a recent Governance and Risk meeting involving the platform’s Governance Security Module (GSM).
Today's Governance call should be lively… a lot to discuss! Join and learn about the GSM delay & Dark Fix details. https://t.co/yWifpfIgov
— Maker (@MakerDAO) February 20, 2020
The GSM is a mechanism in which MKR token holders are given a chance to review any changes that will go into the system and act accordingly if those changes are deemed to be malicious.
Currently the module is set at zero hours which would enable a bad actor to infiltrate the system in real time or governance to be abused if compromised.
Today’s meeting will put forward a proposal to raise the GSM to a 24 hour delay giving MKR holders a full day to respond to any spurious governance results.
Previous attempts to push this through failed due to insufficient knowledge and lack of awareness as highlighted on the MakerDAO Forum.
The Foundation development team has also proposed a Dark Fix mechanism, which provides a way to pre-authorize a specific bug fix without exposing its bytecode on-chain.
DeFi is an embryonic crypto ecosystem, barely a couple of years old, so things will break and fixes will be required as it evolves. Bitcoin maximalists rushing to condemn it is completely counterproductive to the ethos of crypto and why we’re all here in the first place.
Will DeFi continue to evolve into a truly decentralized ecosystem? Add your comments below.