How Decentralized Protocol Harvest.Finance Managed to Recover From a $31.4M Loss

How Decentralized Protocol Harvest.Finance Managed to Recover From a $31.4M Loss

By Ed-california | CoinBuzz | 15 Dec 2020


Crypto is like the wild west. There is always someone with a bigger better gun. One day you might strike gold, the next you might get robbed. 

That’s just how this revolutionary new frontier works sometimes. 

A prime example of the crypto wild west in action is what happened with Harvest Finance (FARM) – the DeFi protocol that puts idle crypto assets to work in high-yielding farming opportunities. 

Harvest Finance is a pretty fresh protocol that launched on August 31, 2020, by anon DeFi devs. Its launch happened to be in the midst of the DeFi boom and quickly began growing at a rapid pace: 

Just 2 months after launch on October 21, Harvest Finance surpassed $1B in total value locked (TVL) in its protocol. 

Shortly after, Harvest Finance suffered from a flash loan attack on October 26, resulting in the loss of $31.4M as it was siphoned out of the protocol within minutes by the attacker.

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According to various reports on the matter, the attacker utilized a flash loan to exploit an arbitrage and impermanent loss mechanism to manipulate the value of Harvest’s USDC and USDT vaults deposited in Curve.fi.

The attacker used the flash loan to drive down the price of USDC and USDT, allowing them to scoop up these stablecoins at far below their market value, exit with profits, and then pay back the flash loan. 

The hack took all of seven minutes from start to finish and the attacker walked away with $31.4M in stablecoins – which he quickly swapped for BTC using renBTC and Ethereum mixing service Tornado.Cash. 

The Harvest Finance attack put Harvest’s DeFi yield-farming protocol on everyone’s radar. Nearly every crypto news outlet covered what happened and it didn’t paint Harvest Finance in a good light:

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Harvest Didn't Give Up 

Despite the flurry of negative news, Harvest Finance didn’t give up. 

You know why?

Because Harvest is the ethos of Chad. And let me tell you… You don’t fuck with Chad.

If Chad gets knocked down, he gets back up. It doesn’t matter what gets thrown his way, Chad always comes out on top.

This was, and still is today, the attitude of Harvest Finance. 

I mean, Harvest could have been a lil bitch and said:

“Hey, our high-yielding DeFi protocol was cool while it lasted, but since the hack, we just don't see a way to recover and proceed… We’re closing up shop.”  

Instead, Harvest embraced the ethos of Chad and continued grinding day in and out to provide DeFi degens everywhere with the highest DeFi yield-farming opportunities. 

Not only that, Harvest was completely professional, honest, and transparent with their loyal community of DeFi degens moments after the hack:

As soon as they could, they began divulging all known information about the attack. They let users know that the hack was carried out via a flash loan attack performed through the Curve y pool and updated everyone on the steps they were actively taking in real-time:

After just a few hours of investigating, Harvest Finance managed to gather significant amounts of identifying information on the attacker and respectfully urged them to return the funds to their users:

Unfortunately, the hacker failed to fully comply with their pleas but did return $2.5 million. 

Harvest Finance then put out a $100,000 reward for anyone who could return the rest of the funds and released a “Harvest Flashloan Economic Attack Post-Mortem” on the very same day the attack took place. 

All that said, Harvest handled the attack with extreme vigor, making it a priority to keep the community informed with transparency at the forefront of their investigation. 

The holy GRAIN 

Not only did Harvest aptly handle the events of the attack extremely well, but they also followed through with community updates and a “Flash Loan Attack Reparations Poll” to get suggestions on how to compensate USDC and USDT depositors who suffered losses from the attack.

In the post, Harvest stated that they were building a snapshot claims portal to distribute back the $2.5M that was returned back to them, bringing the drawdown to ~13.5%. They also created a poll suggesting the following solutions:

Option Strawberry
Create an IOU token for USDC/USDT depositors that feeds a percentage of profit sharing cashflow and a percentage of weekly emissions to reparations pools, up to the amount lost in the attack.

Option Cherry
Don't create an IOU token, USDC/USDT depositors would take the ~13.5% loss. Dedicate all dev time and resources to the existing roadmap.

Option strawberry was chosen by the community with a 71.93% majority of votes:

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Just like that, the holy $GRAIN token was born and one more poll was needed to determine its base pair for its own Uniswap market. The options were GRAIN/FARM and GRAIN/USDC and the community overwhelmingly voted on GRAIN/FARM with a 91.43% majority:

As stated in the GRAIN base-pair post:

“The GRAIN/FARM pair creates a FARM supply sink, while at the same time giving GRAIN holders who also own FARM the ability to get more FARM emissions by staking in Uniswap. [...] This gives a market value to GRAIN, by using some emissions to incentivize a liquid market.”

Where Harvest and GRAIN are Today? 

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“Every humble farmer on Harvest is a Chadiator. Our farmers have proven that they are capable of immense courage and resilience in the face of great adversity, and are therefore fighters.”

The above quote couldn’t be more true. The Harvest community has kept strong through this entire process and continues to engage on Twitter, create Chad farming memes, and funny videos… doesn’t that remind you of LINK marines?

Maybe Chad will become the next super meme in crypto next to green frogs? Or perhaps a merger of the two?

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Moreover, apart from all the positive happenings in the community, Harvest’s GRAIN/FARM market has been created on Uniswap and is performing well with a total of 1,384,162 GRAIN and 1,277 FARM pooled tokens and $275,185 in liquidity:

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GRAIN/FARM Pair Uniswap Stats (Source)

All future emissions and profits generated by the market pair will continuously be used to buy and burn GRAIN from the market until all $31.34M has been repaid to the community.

Also, as the GRAIN/FARM pair grows in liquidity, Harvest Finance’s total value locked (TVL) is back on track at roughly 75% of the way to its ATH with $700M locked in:

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As seen in the chart above, Harvest Finance’s TVL is steadily climbing with higher lows, putting its TVL in a healthy uptrend and setting Harvest up for an explosive year ahead. 

That said, don’t sleep on Harvest Finance. It’s well on its way to making a full-blown recovery from its immense $31.4 M hack and will continue to provide humble farmers everywhere with the most lucrative DeFi yield-farming opportunities.


Ed-california
Ed-california

Crypto's the future and you know it.


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