600 ETH Lost in PolyButterfly Rug Pull
The Intelligent Insurer #20 – Rug pulls in the DeFi ecosystem and how to protect against them
It appears that many hackers in the DeFi ecosystem have shifted their attention towards Polygon (MATIC). The number of rug pulls occurring on the platform has recently raised concerns. Users have started to adopt a super-cautious approach as far as staking, yield farming, and swapping are concerned on the platform.
While the number of rug pull instances with Polygon-based projects has risen, this phenomenon does not extend to all projects built on Polygon. Some exceptional projects with robust security also operate on the platform. Each project needs to be assessed on its own merits.
In the latest intelligent Insurer, we highlight the details of a recent rug pull that happened in a Polygon-based DeFi project. We also mention a few projects that have been flagged as potential rug pulls, while revealing how investors can keep safe in the DeFi and cryptocurrency industry.
PolyButterfly Vanishes With Investors' Funds
Polygon Network (formerly MATIC) has experienced significant growth in terms of adoption recently. In the middle of May, an additional 75K users joined the platform within a space of 7 days. The current design and structure of the project have earned it a reputation as a platform that could improve scalability on the Ethereum blockchain.
Since rebranding, Polygon has experienced significant adoption. This adoption and increased usage are so significant that in May, when most cryptocurrencies experienced a price crash, the platform’s MATIC token surged by ~137%.
While Polygon has experienced impressive growth in both user influx and the value of its token, it appears that hackers have also begun to focus on the platform. One of the recent exploits is a rug pull that took place on the Polygon-based DeFi protocol PolyButterfly.
On June 5th, PolyButterfly vanished along with all other online platforms associated with it. Its social media accounts on both Twitter and Telegram were deactivated and the project's website was shut down as well. About 600 ETH, estimated to be worth roughly $1.5 Million was stolen in the rug pull.
More Projects Flagged on Polygon
RugDoc, a community transparency platform, has raised alarms over some other Polygon-based DeFi projects, warning users against the possibility of rug pulls. This is based on some technical flaws that have been identified in the projects’ designs. Flagged Polygon projects include Taba Finance, Aura Finance, and PolyWeed, and others.
Rug pulls are certainly not exclusive to Polygon projects. It has been a pain-point for the overall DeFi ecosystem. Ethereum and Binance Smart Chain (BSC) have suffered even bigger hits from these kinds of issues.
Many refer to the novelty of the DeFi industry as an explanation. Several projects are still in development stage and have vulnerabilities in terms of security.
Unfortunately, this is being successfully exploited by malicious practitioners in the industry to rip off the unsuspecting public. Users need to put in place more robust security measures to ensure that their funds do not suffer the same fate as funds in projects like PolyButterfly.
Protecting Against Rug Pulls and Other Risks
Adopting insurance solutions like Insured Finance is one such measure to protect against rug pulls. Insured Finance is a two-sided marketplace that allows users to secure tailored protection against rug pulls, exchange hacks, stablecoin failures, and several other risks associated with cryptocurrency investments.
As DeFi remains in a largely experimentative phase, more rug pulls will undoubtedly follow. Even when relative maturity is achieved, risks will not cease to exist. Intelligent investors are adopting insurance solutions to ensure that their downside risk is limited.
About Insured Finance
Insured Finance is a decentralized, peer-to-peer insurance marketplace. Insured Finance users can request customized insurance on a wide variety of digital assets. Those that fulfill requests earn premiums and can earn a competitive return on their capital. Claims are fully collateralized and settled instantly.