Crypto crash: Babylon Finance shuts down

Babylon’s Finishing Blow – The ecosystem of decentralized finance (DeFi) is plagued by attacks diverse and varied. In most cases, these do not have systemic impacts. However, in the case of Babylon Financethe hack of Rari Capital was fatal.

Rari Capital: 80 million dollars vanished

In December 2021, the protocols Rari Capital and Fei-Protocol announced a merger. The objective was to propose a more complete project, while aggregating the liquidities of the 2 protocols. The merger of the two entities will take the name of Fuse Protocol.

However, only 4 months after the merger, the protocol was the target of an attack. Indeed, an attacker exploited a so-called reentry. To put it simply, this kind of flaw appears when a function of a smart contract calls another, without having finalized its execution beforehand. Consequently, the attacker can multiply the calls to the function presenting the flaw to exploit the pools of the protocol.

Results : $80 million had been stolen from the protocol pools, including 6,037 ETH and many ERC-20.

Following this attack, the protocol teams tried to offer $10 million reward to the attacker in exchange for the return of the funds. However, this one never gave any sign of life, leaving the protocol in agony.

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Babylon Finance: collateral victim of the hack

Unfortunately, in this kind of hack, the victims are numerous. The first affected are obviously the usersfollowed by members of thecrew of the attacked protocol. However, in some cases, these hacks have more systemic dimensions and impact the proper functioning of other actors.

Thus, on August 31, Ramon Recuerothe founder of Babylon Finance, announced the closing the protocol. In his tweet, he explains that the protocol was unable to recover from the Fuse hack:

“Babylon Finance is closing. Despite our best efforts, we were unable to reverse the negative dynamics caused by Rari’s hack. The bear market did not help. »

Ramon Recuero announces the end of Babylon Finance – Source: Twitter

In a article published in parallel, the latter details the impact that Rari Capital has had on its protocol.

In February 2022, after one year of existence, Babylon Finance created a loan market on Fuse baptized “BABL”. Quickly, Babylon became an important player in Fuse. Sure enough, the BABL pool was among Fuse’s top 10 pools, with $10 million in TVL.

2 months later, the Fuse protocol was hacked and the descent into hell started for Babylon Finance.

The descent into hell of Babylon Finance

First, users have removed 75% of the TVL of the protocol following the hack. In 2 days, Babylon sees its TVL go from $18 to $4 million.

Babylon Finance users removed 75% of TVL from protocol following Fuse hack
Babylon Finance’s TVL plummeted after Fuse hack

For its part, the team has lost about 3 months fee of operation when hacking Fuse. In parallel, the governance token of Babylon Finance saw its course divided by 4going from 20 to 5 dollars.

“The token price crashed from $20 to $5, removing any possibility of funding future activities from token sales. The supply of tokens is limited, non-inflationary, and only 10% remains in treasury. »

Babylon Finance Statement

Faced with this succession of misadventures, the Babylon teams arrived at a point of no return. This is why the team decided to end the protocol:

Although most protocols never shut down and remain in a zombie state, we believe that shutting down is the only responsible solution. Leaving the DAO in a zombie state is definitely easier and cheaper than shutting it down. It also presents fewer legal complications. However, that is certainly not the moral or ethical thing to do. »

The hacks can be insurmountable for some DeFi protocols. What’s more, hackers are doubling their ingenuity to detect the slightest flaw in DeFi protocols. At the rate it’s going, these hacks are not about to stop.

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Crypto crash: Babylon Finance shuts down


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