ZkSync Rescues Gemholic After Botched Token Sale

Gemholic, the team behind the GemSwap decentralized exchange, will be able to retrieve 921 ETH ($1.7M) raised in a token sale, after a bug in their smart contract resulted in the team losing access to the funds on Thursday.

However, the project’s future hangs in the balance, with the Gemholic team announcing that presale participants will determine whether the project should continue as previously planned or return the funds and cease operating.

“If we manage to recover the 921 ETH, we will still listen to those who contributed to the Gemholic Ecosystem Presale,” Gemholic tweeted.

GemSwap is the fifth-largest DeFi protocol on ZkSync Era with a total value locked of $3.7M, according to DeFi Llama. The project represents 5.6% of Era’s combined TVL.

Gemholic developers tested the code for their token sale on BNB Chain, an Ethereum Virtual Machine (EVM)-compatible Layer 1 blockchain, before deploying on ZkSync Era, an EVM-compatible Ethereum Layer 2 network.

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But after raising 921 ETH from investors, Gemholic discovered they could not access the funds due to a bug in their code.

Gemholic then appealed to Matter Labs, the team behind ZkSync Era, who devised “an elegant solution [to] unfreeze the contract.”

Inadequate Testing

“After deployment, [Gemholic] encountered an issue with their contract due to the usage of the .transfer() function,” tweeted ZkSync. “Unfortunately, the contracts were deployed on Era mainnet without having been tried on the testnet or local node, which would have immediately caught the problem.”

The team added that Ethereum developers were warned not to use the functions three years ago.

Matter Labs said it took the Gemholic situation “extremely seriously,” and devised a plan to recover the funds by making “minimal changes in the gas metering of the protocol.”