$2 Million DODO DeFi Hack

The Intelligent Insurer #11 — Why DODO stakeholders are unlikely to recover their funds

There are reports that the China-based decentralized exchange (DEX) DODO has been exploited and tokens worth over $2 million stolen. The automated market maker announced that several of its liquidity pools were successfully attacked including the WSZO, WCRES, ETHA, and FUSI pools.

This attack is the latest of the growing list of exploits that have hit home at the developing sector of decentralized finance (DeFi). A lot of users believe that this is a learning curve for the industry, just like other innovations that came before it. However, the losses will continue to rack up while DeFi remains in its nascent stage.

In the latest Intelligent Insurer, we will highlight the details of this exploit and the impact that it could have on the growing DeFi industry. We will also proffer solutions on how users can protect themselves from the losses associated with exploits like this.

What Is The Guarantee Of Investment Recovery?

DODO is a Binance Smart Chain-based project with a total value locked (TVL) of about $40 million at the time of writing. Data from DeFi Pulse revealed that the all-time high (ATH) TVL of DODO is about $62.2 million, which was achieved in February 2021.

(Source: Defipulse.com)

The team at DODO has disabled the pool creation portal temporarily due to the attack. The team claims to be working with their security partner to recover the stolen funds. Events like these leave investors frustrated and can put them in a state of panic where they unnecessarily liquidate other crypto assets. The harsh reality is that it is unlikely that any hacked DODO funds will be recovered. If they are recovered, it will likely be a lengthy process.

Victims of a similar exploit that happened in February saw the Furucombo DEX lose $14 million. Stakeholders are yet to recover their funds. Recently, the platform promised to issue “iouCOMBO” tokens to the affected users with which they can reclaim their funds down the road. The process of this recovery is expected to take as long as 360 days.

The managing partner at Puzzle, Jerry Zhou, believes that this is a temporary setback that DODO will eventually overcome. Meanwhile, he also acknowledged the frustration of investors whose funds are at risk.

Tailored Insurance Solution For Crypto Users

The risks faced by investors in DeFi require security measures that go beyond analyzing projects. Digital asset insurance solutions are a security measure that can ensure protection from situations like the DODO exploit. Insurance solutions in the industry allow users to reduce their exposure to unnecessary risks, while maximizing their upside.

Several existing protocols offer insurance solutions to cryptocurrency users. Nexus Mutual, Augur, and Opyn represent some of these early insurance solutions. However, the services of these platforms are limited and conditional. For instance, while Nexus Mutual offers a common capital pool, Augur and Opyn do not. Also, Nexus Mutual is not fully collateralized, while Augur is. These are the kinds of limitations that are addressed by Insured Finance.

Insured Finance provides cryptocurrency users with a fully decentralized and tailored peer-to-peer insurance solution. It is a protocol where every customer can have a unique policy to cater to their individual needs. No limitations or restrictions. Also, payouts are instant, unlike the case of the Furucombo DEX mentioned above where users have to wait for about a year to recover their funds.

About Insured Finance

Insured Finance is a decentralized, peer-to-peer insurance marketplace. Built on the Polkadot blockchain, Insured Finance users can request customized insurance on a wide variety of digital assets. Those that fulfill requests earn premiums and can earn a competitive return on their capital. Claims are fully collateralized and settled instantly.