Andy2024

How much of your crypto portfolio is onchain in self-custody?

Bridging continues to be the most difficult problem to solve as an industry.
The tradeoff between UX and security is incredibly hard to solve.

Composability works both ways.
You get insanely unique yield products onchain that you can't find anywhere. You also get a massive surface area of risk that is near impossible to untangle once wound up.
DeFi will be fine. It will persist through all of this as it always has, it will likely take on a new form.
New risk curators. New levels of due diligence. Far more conservative actors. More community pushback about centralized attack vectors.
Tough weekend for DeFi, but we will survive. Onwards.

The future of DeFi is not single nodes or single signer setups.
What we’re experiencing now is a lack of better security practices, which doesn’t matter 364 of 365 days of the year, until it does matter. A lot.
In this particular incident, you have basic security mismanagement that has been confirmed by sources close to the matter:
1.) It was an official LayerZero DVN that was attacked with very poor security practices.
2.) Applying these practices to a 1/1 DVN under centralized internal control which was exploited.
There was centralization risk on the amount of nodes (in this case, just one)

Current assumption is the haircut for Aave WETH depositors is a few percent maximum and won't be that bad when it's all said and done.

I’m absolutely shocked as to how many teams are coming out today with LayerZero DVN freezes that are effectively a 1/1, 2/2, or a 2/3 multisig as if we didn’t learn anything from the Multichain or Wormhole bridge exploits.
This level of centralized negligence with user funds is extremely irresponsible.

In 2024 there was so much criticism about restaking being extremely risky because its ability to cause systemic damage to Ethereum.
This is certainly recoverable but a clear example of that systemic risk in action.

Rumor mill saying TokenLogic pushed extremely hard to get rsETH listed as collateral on Aave e-mode because they had KelpDAO as a treasury management client.
Kelp stole code from Renzo, has a past of infinite mint bugs, and should not have been a part of e-mode.

Why would any protocol setup a 1/1 approval process for anything substantial ever???
Makes no sense man

I remain optimistic about the future possibility of low-risk, resilient DeFi.
It just doesn’t exist today yet.

It’s reasonable to think that there will be some medium-term contagion from today’s exploit.

Every protocol is pausing LayerZero OFTs, assessing contagion and no one knows how much bad debt Aave will be left with.
This is looking very very bad.

LayerZero is on the hook big time here.

Current list of DeFi protocols with frozen markets/pauses ongoing after $280M rsETH exploit:
- Aave V3 (could be in a bad debt)
- SparkLend
- Lido Earn
- Fluid
- Ethena
- Compound
- Yearn
- LayerZero
- Euler
- Upshift
- Pendle PT/YT tokens
- Beefy

CLARITY is coming.

This is a pump for ants, the real move is yet to come.

10,000 HYPE and a dream.