Barely two months ago, the total value of the locked funds (TVL) on hyperliquid, a decentralized decentralized scholarship (DEX) which allows traders to generate yields by marking a shared safe, seated with a record of $ 540 million.
Now, users flee, TVL has dropped $ 150 million and yield fell to a meager 1%, in many cases, less than they would get their money in a bank account.
The problem is a feat that has seen a user manipulate the price of a token called Jelly and force the safe, known as a hyperliquidity supplier, in a loss. But the negative NLP was not the reason for the exodus. Rather, it is the hyperliquid response, which has aroused concern about the decentralization of the protocol really, and if it acted exactly as the centralized exchange model which he tried to distance himself.
For handling, the user has short-circuited jelly on the hyperliquid, which is sold to tokens that they did not have. They also bought tokens on illiquid decentralized exchanges. The absence of liquidity deceived the price oracle to relay a price inflated to hyperliquid, forcing the hyperliquidal safe to inherit a toxic position via the liquidation.
While the price of the jelly increased more due to the pressure purchase pressure, the NLP for the hyperliquid safe flowed more in the red. Finally, the exchange force closed the frost market, setting it to $ 0.0095 as opposed to the $ 0.50 which were supplied with oracles via decentralized exchanges.
This meant that the negative NLP was wiped and, on paper, the vault worked well throughout the saga. But the action has raised concerns concerning the control of what is supposed to be a decentralized process. At the time, the CEO of Newe Research, Corey Hoffstein, questioned the legality of the actions and social media of hyperliquid became indignation.
Some believe that the feat was an error on the part of hyperliquid.
“The feat of jelly on hyperliquid was not a stroke of luck,” said Jan Philipp Fritsche, managing director of Oak Security, in Coindesk. “It was a case of risk manual of Vega not taken: when leverage trading on volatile assets is authorized without correctly explaining how this volatility can drain the risk fund. The attacker opened massive opposite positions in jelly, knowing that a side would collapse and that the other would rest.
“It is not theoretical. It happened. And it will happen again. We have reported this exact risk vector in audits before, but economic defects are often ignored because they are not technical. It is a mistake,” added Fritsche.
In this case, the manipulator ended up with a small loss.
It should be noted that Hyperliquid has tried to remedy the concerns of centralization, to upgrade its system into a vote by a chain validator for the radiation of assets, which means that the exchange will not be able to delete as the jelly in the future without validator consensus.
The volume remains stable while the media is falling
While the safe has suffered a hard blow in terms of confidence and brand, the exchange itself continues to vibrate very well in terms of trading volume. More than $ 70 billion in volume has been marked so far this month and it seems to be on the right track to beat its January $ 197 billion record.
However, the native token of exchange (hype), which was distributed to users in December, did not imitate the positive performance of exchange, losing 60% of its value in the last four months, its market capitalization by decreasing from 9.7 billion to $ 4.6 billion.
