DeFi Giant dYdX Says Its v3 Platform Is Compromised – Just as It’s Reportedly Up for Sale
Introduction
The decentralized crypto-exchange giant dYdX announced on Tuesday that its v3 platform has been compromised. This news came just as Bloomberg reported that dYdX v3 is up for sale. The dYdX team warned users to avoid visiting the dydx.exchange website until further notice.
The Compromise
dYdX revealed that one of its on-chain trading services was attacked. Specifically, the older version of their trading platform, dYdX v3, which handles about $1.5 billion in weekly derivatives trading volume, was targeted. According to a tweet from the company, the website for dYdX v3 has been compromised.
The attackers have not affected the funds that traders already have on dYdX. The issue is limited to the web domain, not the underlying smart contracts. Statements from dYdX’s Discord server indicate that the attacker took over the v3 domain (dydx.exchange) and set up a fake website. When users connect their wallets to this fake site, it asks them to approve a PERMIT2 transaction, which can steal their most valuable tokens.
Impact on Users
The dYdX community team has been active in warning users. They advised everyone to avoid the v3 website until the issue is resolved. Importantly, the newer and larger dYdX v4 platform, which saw $6 billion in trading volume last week, is unaffected by this attack.
Timing of the Compromise
The news of the compromise came just after Bloomberg reported that dYdX v3 is up for sale. Potential buyers include Wintermute, a major market maker. This timing has raised concerns among users and potential buyers.
Sale of dYdX v3 Software
dYdX Trading Inc., the developer of the decentralized finance (DeFi) exchange, is in talks to sell some of its derivatives trading software. The potential buyers include Wintermute Trading Ltd. and Selini Capital. These discussions have not been made public, and representatives from dYdX, Wintermute, and Selini have not commented on the matter.
Background of dYdX
dYdX allows users to trade perpetual futures contracts directly with each other. These contracts cover various cryptocurrencies like Bitcoin, Ether, Solana, and Dogecoin. Launched in 2017 on the Ethereum network, dYdX shifted to another layer over the blockchain with the v3 software to reduce fees and increase transaction speeds. Last year, the platform switched to the current v4 format, launching its own blockchain.
The Compromise Details
dYdX noted on Tuesday that the website for v3 has been compromised. They advised users against clicking any links related to the v3 platform. The v4 platform, which is more secure and faster, is not affected by this issue.
Why v3 Is Still Popular
Despite the compromise, the v3 platform remains popular among traders. It offers higher liquidity for some tokens and less slippage on large transactions. According to Gauntlet, a crypto risk modeling firm, this makes v3 appealing to many traders.
Financial Backing and Revenue
dYdX Trading is backed by venture capital firms like Andreessen Horowitz and Paradigm. The v3 platform generated $137 million in fees in 2022, based on a total trading volume of $466.3 billion from over 33,900 unique traders. According to DeFiLlama, the v3 platform is forecast to generate about $18.67 million in revenue this year. However, US residents are not allowed to trade on the exchange.
Mergers and Acquisitions in DeFi
Mergers and acquisitions are rare in DeFi because most projects use open-source software. This means anyone can use, modify, and redistribute the software. However, the potential sale of dYdX v3 shows that even in DeFi, there are valuable assets that attract buyers.
History of dYdX
dYdX was founded in 2017 by Antonio Juliano, a former software engineer at Coinbase and Uber. He stepped down as CEO in May but continues to serve as president. Ivo Crnkovic-Rubsamen, who succeeded Juliano as CEO, was previously a trader at D.E. Shaw.
Security Measures
The dYdX team is taking the compromise seriously and is working to resolve the issue. They are focusing on ensuring that their platforms remain secure and that user funds are protected. The team has advised users to be cautious and to verify the authenticity of the websites they interact with.
User Reactions
The news of the compromise has led to mixed reactions from the dYdX community. Some users are concerned about the security of their funds, while others are hopeful that the issue will be resolved quickly. The potential sale of the v3 platform adds another layer of complexity to the situation.
Future of dYdX
The future of dYdX looks promising despite the current issues. The platform’s strong financial backing and innovative technology make it a leader in the DeFi space. The team’s commitment to security and user protection is also a positive sign for the platform’s future.
Conclusion
The compromise of the dYdX v3 platform is a significant event in the DeFi world. It highlights the importance of security in decentralized exchanges and the challenges they face. The potential sale of the v3 software to major market makers like Wintermute and Selini Capital shows that there is strong interest in the platform’s technology. As the dYdX team works to resolve the current issues, users are advised to stay cautious and informed.
