A bug was found in the YAM protocol code last night. This led to an unintended YAM token supply growth and a loss of control over decision management. However, the problem was fixed by delegating 35 thousand coins to a third-party pool.
We have found a bug in the rebasing contract, please read below.
All funds in staking contract are safe, as this is an unrelated part of the protocol.
User YAM balances are also unaffected.
— Yam Finance (@YamFinance) August 12, 2020
Despite the approved decision, YAM developers recommended supporters of the project to withdraw tokens from pools. The token price immediately reacted to this report with a drop from $ 167 to $ 0.8 within 2 hours.
This caught the crypto community with devastation, making many investors of the cryptocurrency loss a chunky size of their wealth.
The creators of YAM call their project “an experimental protocol with elements of programmable money emission and management.” It allows users to receive tokens through deposits in eight staking pools. Everyone can get YAM digital assets with several tokens, including COMP, LEND, LINK, and MKR. The distribution of the project’s cryptocurrency, according to the project’s blog, began yesterday.
According to Coingecko, YAM entered the crypto market on August 11 with a unit value of $11 against the US Dollar. Around the closing hour yesterday, YAM token had already spiked to $167, its all-time high, before witnessing a tragic fall.
To Earn At Any Cost
Note, that the startup team did not audit smart contracts (a security measure) before launching it for public. But the presence of risks did not deter many investors.
Crypto farmers don’t care what the essence of the project is. Their task is to get the most out of the startup by any means. To attract attention, information about the startup was published far and wide in the communities of crypto farmers.
— "L" : hacking 💸 moneymail : baker (@lwsnbaker) August 11, 2020
Adherents of the yield farming strategy hastily invest in the new DeFi project YAM. Amid the attention of market participants, the startup received about $ 76 million in investments in less than an hour. As a result $ 470 million was stacked on the protocol on the very first day of launch and the price exceeded $ 167.
Even well-known representatives of the crypto industry invested in the project; for example, the founder of the BitMEX crypto exchange Arthur Hayes.
Profitable farming is an investment strategy that emerged from the meme for making money on projects from the decentralized finance (DeFi) sector. The direction includes various types of interaction with projects in order to make a profit. For example, a user can invest in a DeFi project to provide loans. Due to the turnover of his assets in the system, the crypto farmer receives income. Also, the strategy may imply earnings on token staking, investments in liquidity pools, and other more complex options.
Similarly, users of Compound DeFi project can also provide funds or borrow. At the same time, the system participants have the right to a part of the COMP tokens, which are distributed by the project representatives.
The influx of a large number of “farmers” led to an increase in demand for the Compound cryptocurrency, which positively affected the project price.
DeFi Sector Risks
We will remind, earlier the co-founder of Ethereum Vitalik Buterin also shared his opinion on the state of the DeFi market. He believes that users should be wary of smart contracts in the decentralized finance sector. The developer expressed his point of view in the Unchained podcast.
Vitalik considers DeFi products to be of high-risk, and doubts the stability and security of even the largest projects in the decentralized finance sector.