A safer DeFi environment with wrapped tokens

A safer DeFi environment with wrapped tokens

As we launch the Lossless Controller on the Ethereum Mainnet, list the $LSS token on some of the major exchanges, and onboard the first project to implement the Lossless anti-hack tool on its token, we’re certainly getting closer to fulfilling all of the goals from our roadmap.

All the risks of participating in the DeFi market

Virtually everyone in this industry has heard of devastating hacks that have struck some of the best-known projects. Some of the worst attacks have counted losses in millions of dollars on one occasion, tallying around $3.8 billion in collective damage in 2020 alone.

  • an exploit that caused DODO to lose $3.8 million,
  • a flash loan incident that robbed Alpha Finance and Cream Finance of $37.5 million,
  • an infinite minting hack on PAID Network that slashed the token price by 80%,
  • an evil contract that damaged Furucombo by $14 million.

Wrapped tokens to the rescue

Despite the best efforts of the existing hack-protection tools, they still leave plenty of room for attacks to happen. This is because they aren’t capable of freezing and actually reversing the hacks when they do happen, at least not without sacrificing the core principles of the DeFi.

  • post-hack tools (insurance and money tracking products);
  • one-off bounty programs;
  • compromising decentralization (although successful in corner cases, like Tether).

Wrapped tokens — behind the scenes

Lossless will equip the participating projects with a piece of hack protection code which will be embedded in their tokens. This code will wrap these tokens, creating a pegged L-token version of their existing or newly launched tokens.

  • checking for unusual token activities (e.g. major transactions from the team’s wallets and liquidity pools without previous indication, etc.);
  • third-party reports (such as about exchange security leaks and blockchain hacks);

Adoption of wrapped tokens

Given the plague of major attacks that have struck the DeFi market, protocols are yearning for an effective yet easily implemented solution to protect assets in their smart contracts. Wrapped tokens are the best possible answer to this widespread problem.

World’s first crypto hack mitigation tool for trusted and safe DeFi.