Andre Cronje on Feb 27 dismissed reports alleging a bug in his new DeFi project Solidly could have allowed user funds to disappear from liquidity pools.
This comes as the protocol amassed as much as $2.24 billion in total value locked (TVL) in the 72 hours following its launch.
Users have complained of a security flaw in the Solidly Exchange smart contracts, which has led to funds disappearing from liquidity pools.
One user, identified only as NiQlaus, claimed to have lost the equivalent of $21,000 of the fantom (FTM) token during a transaction on the exchange. Another said they lost about $24,000 after a botched swap attempt between the stablecoin USDC and FTM.
“I have lost all my funds in a Solidly transaction,” lamented NiQlaus, in a ticket logged with Solidly support on Github. “When the transaction executed, it returned 0.01% of what I should have received.”
“It seems the exchange chose a stable liquidity pool [LP] without liquidity when there was another variable LP with all the liquidity. It means there is no verification of the LP liquidity when the AMM automatically selects stable or variable LPs, without any possible user intervention,” he complained.
‘No funds lost’
Andre Cronje, the star DeFi architect famed for creating Yearn Finance and Keep3rV1, told BeInCrypto that “there are zero funds disappearing” from Solidly’s liquidity pools.
“There have been no smart contract bugs identified in any of the live contracts,” he said via a chat on Telegram.
Referring to the NiQlaus incident, who supposedly lost nearly $21,000 on the platform, Cronje asserted:
“That’s the only thing that has happened, and that’s due to users not confirming their output received. They then trade through low liquidity pools. This is not a loss of funds in liquidity pools. This is simply users trading via pairs that don’t have liquidity, which again, is nothing on the protocol level.”
What is Solidly?
Solidly was officially launched on the Fantom blockchain on Feb. 24 as an automated market maker (AMM), a method that allows traders to trade in the absence of an order book as a source of liquidity.
The basic import of Solidly is that Cronje aims to create a token ecosystem that is more efficient, pays 100% of fees to people locking their assets, and is more sustainable over time. A project not controlled by liquidity providers, as is currently the case in DeFi, but by protocols.
Solidly leverages vested escrow (ve) token economics, combining the rebased token mechanism of Olympus DAO and ve tokens from protocols such as Convex and Curve. With rebased tokens, investors are free to unstake their tokens, list and sell them on the open market – something that tends to increase supply, causing prices to fall.
Cronje is saying this should not be incentivized. Instead, incentives must be paid to users that have locked their tokens. What better way to do so than for the vested tokens to become non-fungible tokens (NFTs), which can be sold on secondary markets.
These tokens give voting power, and the more governance tokens a protocol has, the more power it has over a specific protocol. Liquidity providers are paid in the form of a token called SOLID.
The platform allows for some of the lowest fees on swaps between assets in the DeFi sector. Investors have eagerly awaited Solidly’s launch since Cronje first hinted at the project in early January and have been piling in since it went live last Thursday.
At the time of writing, Solidly had amassed more than $2.24 billion in total value locked — basically the total sum of assets currently managed under the protocol — according to data compiled by DeFiLlama.
Not a big deal
Brian Pasfield, chief technology officer of decentralized money market Fringe Finance, told BeInCrypto that while the launch of Solidly “has been laced with a mixture of positive and negative highlights,” this was not surprising.
It is “a trend that characterizes the emergence of several innovative projects,” he said. “The team behind the project most likely understands and implements security procedures in the blockchain field and therefore knows the drill when it comes to adequate checks before launching a protocol.”
Continuing, Pasfield said:
“Once again, this shows that security is and should remain DeFi’s number one priority. We can and should create incredible financial opportunities, but never at the cost of users’ funds.”
BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back.