Drama continues to hang over the trailblazing cross-chain decentralized exchange protocol THORChain, with the protocol’s treasury accidentally front-running the highly anticipated token offering of its platform, THORSwap.
The incident comes within one month of THORSwap relaunching services for four of its five supported networks after THORChain went offline for several weeks. It suffered two major hacks just three months after entering its guarded “chaosnet” launch.
ShapeShift CEO and THORChain backer Erik Voorhees proclaimed that the protocol’s April launch was a bigger event for crypto than Coinbase’s IPO in April. “Thorchain goes live tomorrow,” he tweeted on Apr. 12. “Native cross-chain decentralized exchange. Never been done before.”
But THORChain’s launch is a cautionary tale for developers rushing to bring out a cross-chain product to market. THORSwap, a multi-chain decentralized exchange aggregation protocol built on THORChain, had initially scheduled to launch at the start of November over four phases.
The launch began with an initial offering that saw 5,507 participants contribute up to $300 each in a batch auction hosted by the THORChain-native launchpad protocol THORStarter. And 2% of THORSwap’s governance token’s supply (10 million THOR) was distributed to participants at private placement prices.
The second phase would see an uncapped initial DEX offering (IDO) hosted on the THORSwap platform on Nov. 3. The THOR pool was originally scheduled to go live on SushiSwap on Nov. 4 followed by THOR staking shortly after to complete the launch.
Before the start of the IDO, THORSwap had agreed to send 100 THOR to the THORChain Treasury as a liquidity backstop for the uncapped pool. However, heavy congestion from “whale bots” caused the pool to deploy later than planned.
As a consequence, THORChain’s liquidity was mistakenly added too early, resulting in the THORChain Treasury “accidentally front-running everyone else.” THORSwap community members who had patiently waited for the launch were outraged to see the THORChain Treasury accumulate an enormous stash of 3M THOR and spike the token’s price before they were able to access the market.
The THORChain Treasury has since donated their entire THOR holdings to THOR-RUNE liquidity providers in a bid to restore the THORSwap community’s faith in them. Liquidity providers will also receive a “significant airdrop” in the future, with “early whales” to be excluded from the distribution.
The project will also launch a “community feedback campaign” to consult its users regarding the next steps forward, with THORSwap stating:
“The $THOR token launch on THORChain was, frankly, a bad experience for everyone involved. We have built up trust over the years, and we understand it can easily be broken from one event like this. Many lessons were learned and we hope to regain your trust.”
THORSwap successfully deployed THOR-ETH and THOR-RUNE pools to SushiSwap on Nov. 5 and staking launched the following day, how THOR-ETH farming was briefly retired and relaunched on SushiSwap during Nov. 7 with the team citing “some technical reason” as the cause. Twitter-user “RwBrave” responded:
“We appreciate the good work you are doing but please, take your time to deploy a functional product.”
THORSwap also completed an airdrop on Nov. 9, distributing up 600 THOR (roughly $1,370 at current prices) to approximately 4,000 community members who were whitelisted for the IDO on THORSwap or participated in the offering on THORStarter.
The incident comes just a few months after THORChain suffered a string of devastating exploits that saw the protocol’s guarded “Chaosnet” launch placed on hold.
On July 16, a hacker drained roughly $7.6M worth of Ether from the protocol. After donating Ether to reimburse liquidity providers impacted by the exploit, a further $8M in ETH was stolen the following week by a white-hat hacker who requested a 10% bug bounty in exchange for returning the funds.
The white-hat left a message in their transaction input data claiming they identified multiple additional “critical” issues and demanding the protocol be disabled until audits are completed. “Do not rush code that controls 9 figures,” they added.
A third exploit also saw $140,000 worth of assets drained from THORChain in June.
THORChain began a staged relaunch in August after receiving an audit, before restoring trading functionality, and getting a second audit in October.
THORChain is not the only cross-chain project to have been targeted by hackers, with several exploits siphoning millions from multi-chain DEXes and protocols in recent months.
On August 10, decentralized exchange Poly Network lost $600M in assets to a hacker in DeFi’s largest hack in history — beating out the value of the incident previously holding the unenvied record by more than 10 times. The hacker returned the funds two weeks later after negotiating with the Poly team and negotiating to keep a $500,000 “bug bounty.”
In September, cross-chain composability protocol pNetwork lost $277 tokenized BItcoin worth $12 million at the time, while token bridge and application hub ChainSwap suffered losses of $4.4 million and 800,000 in July.