The need for on-chain security, particularly DeFi protocols and solutions, has been an important topic for some time. And while the crypto space intensifies efforts to bring solutions into the field, the perpetrators of the industry are becoming much more relentless.
So what’s a Rug Pull?
In our recent article “Rug Pulls―What They Are and How to Spot One”, we described a Rug Pull to be a type of cryptocurrency exploit where token creators make away with investors’ money. The developers create a token with a promised use case or utility, list it on a decentralized exchange (DEX), and pair it with a reliable and valuable token to serve as a liquidity market. They usually carry out aggressive liquidity and marketing campaigns to generate hype and propose attractive APR (Annualized Percentage Return) figures, pump its unit valuation by injecting liquidity, and pull out investors’ funds after attracting mass traction. DeFi users tend to be drawn by the promises, invest in such activity and get the rug pulled right from beneath them.
Squid Token Falls to Zero
Monday, November 2nd, 2021, Washington Post, alongside other publications, reported that the value of a newly launched Squid token, a cryptocurrency solely inspired by the Netflix blockbuster series, Squid Game, had fallen to zero the night before. The token was trading around $2,860 at the time of the rug pull. It happened right after an announcement by the project owners stating they could no longer continue to develop the project and have to abandon it.
The price of SQUID rose more than 10,000 times in the few days after its release before crashing down to zero on November 1st — the P2E token based on Binance Smart Chain (BSC) experienced a surge in its price, reaching a peak of $2,860 — a lightspeed jump from the initial $0.01. And once the peak hit, it immediately crashed, dropping to below $0.001 within 5 minutes. Right at the same moment, the website of the project disappeared into thin air too.
In the case of the SQUID rug pull, people quickly got caught within the frenzy and hype created by the TV series. This inadvertently led to the subsequent loss of a total value of almost $3.38 million. The scam described was carried out by withdrawing liquidity from the token. This means that a large amount of the tokens belonging to the development team was exchanged for Fiat currencies indiscriminately, causing the price to crash to the bottom.
The unknown creator of Squid Game token explained the abandonment of the project in their Telegram group, saying that SQUID had been hacked and that the team was too depressed from scammers and it had overwhelmed them with stress. A weak cover-up excuse, nothing more.
Could this have been forecasted?
We think that the SQUID project had all the signs of a possible rug pull, which we also described in our recent article:
- The Whitepaper of the project was full of mistakes and seemed to be made in a rush;
- The development team was unknown to the community;
- Absence of use cases;
- An unrealistic growth trend fueled by FOMO;
- A website that seemed off.
You could say the TV series did the entire job, and the project’s creators used the existing public conditions, which is probably why the majority of people bought the token in the belief that this is real.
A Need for More Security Measures
The growth and developments already recorded on the blockchain have evidently outpaced the underlying technology itself, and the scale of further innovative inclusions is impossible to evaluate. Considering the security aspect of DeFi protocols, this fast-evolving ecosystem has, unfortunately, become the target for many astute and nefarious “behind-the-scenes” players (hackers) aiming to find a hefty payday.
Recent events have proven that cybercrime remains a major threat to the adoption of decentralized finance within many industries. However, with an ever-increasing market capitalization, a value which has now touched around $2.79 trillion according to crypto market tracker Coingecko, the need and demand for on-chain cyber security, fraud-proof protocols, and hack mitigation tools have skyrocketed over a short period of time.
Lossless’s Commitment to Hack Mitigation
Our commitment to making DeFi protocols safer, therefore, becomes more evident with our collection of hack mitigation tools.
Recently, we launched our token minter tool, which helps new projects deploy their native tokens and integrate optimum security measures in just a few simple steps. Our token minter eliminates the hassles of having to guide our clients through a series of complex token deployment processes.
Another important mitigation protective solution, which we are currently working on, is the vault protection tool. The most important advantage is that the minted tokens are not entirely susceptible to hacks occurring on the DeFi protocol itself. Our partners’ treasuries will have an option to put up an additional layer of security. The vault protection tool uses set rules like limiting and whitelisting to protect the most important wallets in case of a hack. It is designed to safeguard a significant amount of the vaults under its watch.
Lossless is the world’s first DeFi hack mitigation tool for token creators. Apart from our known cyber security solutions and renowned professionals, the community also plays a role. With a tangible reward system, community members are also encouraged to explore new ways to detect hacks and fraudulent transactions.
Our protocol is designed to identify and halt fraudulent transactions through various methods of fraud identification and automatically reverses any stolen tokens back to the original owner. Our solutions to the impending problems of cyber theft within the blockchain space are thorough and applicable within many protocols.