Decentralized finance protocol Compound plunges 10% after overpaying millions of liquidity mining rewards; bitcoin, ether rise
The Decentralized Finance (DeFi) Compound Lending Protocol saw its COMP token plunge about 10% on Thursday, after a bug in its computer program caused the platform to overpay millions of dollars in COMP as a reward for extracting cash.
Compound is the fifth largest decentralized financial protocol in the world, with a stranded value of more than $ 9 billion, according to the data provider DeFi Pulse. Like many other DeFi platforms, Compound rewards certain users with its tokens for using the platform and providing cash, as an incentive.
After a recent upgrade, a new program that distributes Cash Extraction Rewards contains a bug, causing some users to “get way too much,” Robert Leshner, Founder and CEO of Compound Labs wrote on Twitter.
The bug can impact 280,000 COMP at worst, or $ 84.6 million based on the token’s current price, according to Leshner. However, not all provided and borrowed assets are affected, he wrote.
COMP recently traded at $ 300, down 9.2% in the past 24 hours.
The incident also highlighted the potential downside of the decentralized financing protocol.
The new program was written by a member of the community, with the review of several other members of the community, according to Leshner. âThis is the biggest opportunity and the biggest risk for a decentralized protocol – that an open development process allows a bug to go into production,â he wrote.
Since there is no admin control to disable COMP distribution, any changes would require a 7-day governance process, according to Leshner.
has gained 3% in the last 24 hours, recently trading above $ 43,100. Ether ETHUSD,
has risen 3% in the past 24 hours, recently trading at $ 2,983.
Investors also observed another decentralized Terra platform, as the blockchain completed its long-awaited Columbus-5 upgrade on Thursday, which would allow the blockchain to connect to more decentralized applications and increase the burning rate of its native Luna token.
Luna is the 13th largest cryptocurrency in the world by market cap, according to CoinMarketCap. Terra also powers the TerraUSD stablecoin, a 1: 1 cryptocurrency linked to the US dollar via algorithms.