Whenever a protocol or smart contract is exploited, there will be serious repercussions. O3 Swap, a DeFi project on the Ethereum blockchain, lost 99.15% of its TVL in the past 24 hours. The Poly network hack affects this solution, but its own code remains safe from harm for the time being.
The O3 Swap Liquidity Issue
It is not uncommon for DeFi projects to note a sharp increase or decrease in their Total Value Locked. DeFi is a competitive space and yield farmers will jump from one opportunity to the next. In O3 Swap’s case, however, things are getting rather interesting. The project is still operational and has not suffered from any hack. However, it has lost over 99% of its TVL in the blink of an eye.
The main reason for this decrease appears to be the issues affecting Poly Network. For those unaware, Poly Network was attacked this week, and $600 million in assets were stolen. For now, it remains unclear if the money will be returned or not. However, the breach also affects O3 Swap, as its cross-chain function is currently suspended. Non-cross-chain functionality is still available.
Moreover, the O3 Labs team is convinced there is nothing wrong with their code. Reputable firms have audited it, and its core functionality remains unaffected. Even so, people seemingly feel the need to withdraw all of this liquidity from the liquidity all of a sudden. A strange turn of events, even though the $600 million hack has probably scared off many people.
As some of the funds are now being returned to the rightful holders, things are bound to get interesting. Over $260 million is back where it belongs, but there is still $353 million at stake. Whether that will be returned to the rightful people is a different matter. It is very difficult to gauge what the hacker plans to do with it, as cashing out such a vast sum is impossible without getting caught.
Will The Outflow Continue?
Judging by the current statistics, the O3 Swap outflow may not be over just yet. There is still $1.3 million in liquidity on the platform, although that has decreased by another 10% in the past few hours. Considering how Etheruem and other assets are going up in value, withdrawals are the only logical explanation. Once the Poly Network matter is resolved, things can start looking up again for this project.
Interestingly, O3 Swap is the only DeFi platform on Ethereum to note such a steep outflow. Such panic because its cross-chain swapping functionality doesn’t work correctly seems unjustified. As there is no other reason for such an exodus of funds, the current developments raise many questions. It would be unfortunate to see another DeFi project drop off due to circumstances beyond its control.