On Tuesday, July 16, Degen chain user Temper.degen lost a total of 785,000 DEGEN tokens worth almost $5,000 during the bridge transfer, which represents 90% of the total DEGEN tokens the user transferred.
The incident sparked concerns within the cryptocurrency community about the reliability and security of cross-chain operations, particularly when liquidity is low.
DEGEN Chain’s Response and Commitment to Refund
Though attributing the bug to its service provider, DEGEN Chain has taken full responsibility for the issues that caused the user’s loss. The platform promised a refund and is implementing measures to prevent future occurrences.
A DEGEN Chain representative stated, “One of our users lost almost 90% of their funds during a bridge transfer from DEGEN Chain to Base. Such bugs should never occur, especially when user funds are at stake.”
To address this, DEGEN Chain plans to introduce a claim form for affected users to request refunds, aiming to restore public trust and ensure transaction integrity on its platform.
2/3 Degen L3 is in a tough spot. We’ve received terrible service from our providers, and apologies aren’t cutting it. Outages and lost user funds are unacceptable, especially from companies claiming to specialize in this.
— Degen 🎩 (@degentokenbase) July 16, 2024
Technical Issues and Community Reactions
The technical issue was traced to a liquidity mismatch when converting DEGEN to Ethereum (ETH) on the DEGEN Chain before transferring to the Base chain. The low liquidity in the DEGEN/ETH pool resulted in high slippage and fund loss.
This incident has prompted discussions among DeFi developers and the broader cryptocurrency community about the importance of managing liquidity effectively. Ensuring sufficient liquidity is crucial to prevent slippage and maintain smooth cross-chain transactions, which are essential for the growth and integration of various blockchains.
After the incident, DEGEN Chain has announced a comprehensive audit of transaction processes and liquidity management practices. The platform also plans to change its service providers to enhance standards and reliability. By bolstering the platform’s technical robustness, DEGEN Chain aims to rebuild trust with customers and key stakeholders, ensuring secure and efficient transactions.