Alchemix rugpull remuneration, and Aave v. 2.5! June 16-23

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After close to a month of consulting with industry experts and journalists within Cointelegraph and without, we’re proud to unveil a new segment for Finance Redefined, a.k.a. the premier DeFi industry newsletter: on-chain analysis. 

Reporters will often look to public records to bolster stories, and the blockchain is no different. Everything from analyzing the wallet of the fake Banksy NFT artist to following-up with exploiter wallets in the wake of hacks, the data is often used but arguably not to the extent that it could be.

For instance, there is a wallet widely-known to be that of Mark Cuban, serial entrepreneur and owner of the Dallas Mavericks. He’s doxxed himself indirectly and directly many times — the address is the owner of markcuban.eth, for christsakes. And yet, when he announces that he’s invested in Polygon (or an algo stable shitcoin, RIP Titan) it’s news, but when he makes the moves on the wallet in real time…. the crypto-news industry ignores it?

Reporting on wallet transactions is fraught with complications, however. As Sam Trabucco of Alameda Research told me in Miami, “doxxed” Alameda wallets know that they’re doxxed (“contaminated” is the term they use internally), and trying to interpret a buy from one ‘known’ wallet may only be glimpsing a small part of a much larger picture — Alameda may be hedging with another acct, and as such public buys/sells are ultimately not indications of a wider opinion on an asset.

Check out this thread on folks trying to uncover what Alameda is doing with CRV as an example — the tail-chasing and narrative flip-flopping is extreme:

Additionally, despite ample evidence, if Mark Cuban ever came out and said that a wallet is not his — doesn’t matter if he has the ENS, doesn’t matter if he’s even claimed it as his in the past — we, as an outlet, have no way to definitively prove to the contrary, and as such explicitly linking an individual or institution to a wallet is unacceptable regardless of any amount of circumstantial evidence. 

So, we’ve tiptoed and wondered and thought and thought about it some more. On-chain data is both public and wildly underused by news outlets, but it’s a new source type from a journalism perspective and really uncharted ethical ground.

Some of the language decisions we’ve made might seem a little obtuse, but they’re measured and we think appropriate. Let us know what you think.

We hope you like our first installment, courtesy of Bill Zerox aka @0xbilll:

Alchemix rugpull remuneration analysis 

After a rug pull, desperate community members typically beg developers to return the stolen funds and social media channels become chaotic — filled with stories of tragic loss and impoverished nurses. It only makes sense then that in the first “reverse rug” in DeFi history, it’s the developers begging the community to return the funds. The big difference is that instead of ignoring requests, as exploiters often do, the community has seemingly responded.

Last week, Alchemix suffered a bug that saw users walk away with 2262 ETH (almost $4.5 million USD, even with the recent price decline) in what is being called the first-ever “reverse rug”. Instead of using treasury funds or minting a new token, steps that other protocols have taken to recoup a loss after a bug or hack, the Alchemix team is asking users who benefited to return the ETH.

In exchange, Alchemix is promising users 1 ALCX per 1 ETH returned. If users who benefited from the bug return the full amount of ETH that they were able to withdraw, the team says the generous exploiters will also receive a “special” NFT that includes “yet-to-be-determined functionality in the Alchemix DAO.”

Although unconventional — as the best things in DeFi are — on the surface their ask to the community has been a success. Taking a look under the hood, however, reveals that the majority of funds were donated from one altruistic Alchemist developer while the accounts that walked away with the most ETH show no signs that they will return the funds.

On-chain data shows that the majority of ‘returned’ funds have come in the form of community members donating ETH, as opposed to users returning the ETH that the bug allowed them to claim.

1129.85 ETH has been returned as of this afternoon. Breaking it down, 358.21 ETH (~32%) is from users who benefited from the bug, while 771.64 ETH (~68%) has been donated by community members.

Data taken from Dune Dashboad thanks to 0xGranger at ~2:45 EST June 23rd; https://duneanalytics.com/queries/66340/132563

The largest donation so far is a staggering 730 ETH from an apparent Alchemist developer with the ENS handle n4n0.eth. They did not receive ETH from the exploit, so they are presumably reaching into their own pockets — a testament to their belief in Alchemix and their desire to make the protocol whole.

When called out in the Alchemix discord, n4n0 simply said, “I’m in it for the tech.”

Screenshot taken from official Alchemix Discord channel

A Twitter profile with the same name lists their role as “codemonkey @ http://alchemix.fi.”

Outside of n4n0.eth’s 730 ETH donation, 196 other addresses have donated a total of 41.64 ETH. While some of the addresses may be speculating that those who donate will be eligible for future airdrops, the response also shows that the community wants Alchemix to succeed.

Looking at addresses who received excess ETH from the exploit, the top 20 addresses walked away with almost 1800 ETH, ranging from 25 to 500 ETH. Of those, so far only four addresses have returned the full amount they got off with for a total of 174 ETH.

One of these addresses, themockingjay.eth, returned the 40 ETH that they were able to withdraw because of the bug. Their address shows that they are active DeFi users and early Alchemist supporters, as demonstrated by them apeing into pool 2 a couple days after the protocol launched.

Zerion currently shows themockingjay.eth’s net worth at over $2 million, demonstrating that they are characteristic of DeFi users who are in a position to support a protocol, as opposed to carry off with the funds.

With the promise of an NFT and the chance to live in Alchemix/DeFi/Crypto history forever, perhaps the response here should not come as a surprise.

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