Author: Grapefruit, ChainCatcher
Editor: Marco, ChainCatcher
According to ChainCatcher news on July 24, the decentralized derivatives trading leader dYdX was revealed to be planning to sell the dYdX V3 trading software.
However, within less than an hour after the news was released, the dYdX V3 website (dydx.exchange) was attacked by hackers. The hackers first took over the website and then implanted links pretending to be phishing websites. Once users authorized their information, they might face the possibility of having their assets or information stolen.
As soon as the planned sale of V3 was revealed, its domain name was hacked, and the community speculated whether this was pure coincidence or a premeditated action.
The sale and security crisis of dYdX triggered a series of chain reactions, with users and investors showing obvious concerns. The price of DYDX tokens fell rapidly in response to the news, from $1.45 to a low of $1.23, a daily drop of more than 15%. At press time, the price of the currency fluctuated at $1.27.
Why sell V3? Is the dYdX team going to cash out? Why did the hacker choose this time to attack? Can DYDX tokens still be held? A series of questions filled the community chat page.
Intends to sell dYdX V3, has nothing to do with dYdX Chain
Bloomberg reported that dYdX is in talks with potential buyers to sell part of its derivatives trading software (dYdX V3). It is reported that Wintermute Trading and Selini Capital are among the potential buyers of dYdX V3 software, and the specific amount was not disclosed.
As the leading derivatives company in the DeFi space, the rumor of dYdX selling V3 has attracted widespread attention from the crypto community. Most community users are more concerned about whether the V3 being sold is just the trading software or the entire dYdX brand being sold as a package. Is the dYdX team going to withdraw completely? You should know that the V4 version dYdX Chain launched last year is managed by the DAO community? What impact will this incident have on the overall ecosystem of dYdX? What impact will it have on the price of DYDX?
In response to the news about the sale of V3, dYdX officials responded on social media that dYdX Trading is exploring strategy alternatives related to V3 technology, which does not include Ethereum smart contracts or other technologies managed by DYDX tokens, and this process has nothing to do with dYdX Chain. dYdX Chain is the focus of future development.
It added that the dYdX V3 exchange is a trading engine supported by the operating entity dYdX Trading. All funding and settlement on V3 occurs on smart contracts governed by DYDX token holders, and all V3 transaction fees belong to dYdX Trading.
With the launch of dYdX Chain in V4, all transactions on dYdX will eventually be migrated to this chain, and all transaction fees paid on this chain will belong to validators and DYDX stakers.
He also emphasized that the dYdX Chain code is open source and fully decentralized, which is more in line with the development concept of DeFi products. In the future, the focus will be on building products around dYdX Chain.
Regarding the official statement made by dYdX, community user Bobo summarized to ChainCatcher that it seems that the rumors about dYdX selling V3 are true, but what is sold is only the V3 trading software, which has little impact on dYdX Chain. In addition, dYdX’s main business focus is now dYdX Chain, and the price of DYDX is also directly related to the transaction fee income of dYdX Chain.
User @atg1688 also said that dYdX only sells the V3 trading software, which is owned by the organization dYdX Trading, while dYdX Chain is run by the dYdX Foundation, so the impact is not significant.
The long-awaited V3 domain vulnerability was finally hacked
However, less than an hour after dYdX V3 was revealed to be under sale, the V3 domain name was discovered to have been hacked.
On July 24, dYdX officially issued a reminder that the dYdX v3 website domain name (dYdX.exchange) has been hacked. Please do not visit the website or click any links. However, dYdX v4 has not been affected.
Hackers successfully exploited the vulnerability and tampered with the DNS records of the domain name, causing users to be redirected to malicious websites when accessing dYdX V3. Users encountered phishing attacks when accessing the malicious website, and the private keys and assets of some users are likely to be stolen.
Fortunately, in this hacker attack, only the network domain name became the target of the attack, and the underlying smart contract was not attacked. The user funds on the dYdX platform were not affected. The dYdX V3 domain name vulnerability has been fixed and the website has resumed normal operation. dYdX stated that the dYdX Chain, dydx.trade website and V3 protocol were not attacked.
However, community users are not satisfied with the dYdX vulnerability handling.
As early as July 11, some users had already warned that the dYdX domain had the same vulnerability as protocols such as Compound and Celer. However, after the official dYdX response that no vulnerabilities or security issues had been found, there was no follow-up, and no relevant countermeasures were deployed in advance.
Therefore, some users viewed this hacker attack as a warning against dYdX’s negligence.
However, the timing of the hacker's attack on the dYdX V3 domain name coincided perfectly with the news of the V3 sale, which made community users wonder whether it was a long-planned attack.
Some users said that when dYdX V3 was hacked during the negotiation of software sales, dYdX had to deal with a security crisis and a potential business transaction at the same time, which was a two-birds-with-one-stone move.
Is dYdX selling V3 to “cash out” or for ecological development?
Compared with this security attack, users are more confused about dYdX's plan to sell V3. According to dYdX's original plan, after the launch of the V4 version of dYdX Chain last year, all transactions will be fully transitioned to V4, and V3 will be gradually abandoned. However, dYdX is now trying to sell V3.
In the DeFi space, buying and selling of entire projects is rare because most projects use open-source software, which means others can use, modify, and rebuild it without having to buy it.
A DeFi OG player lamented to ChainCatcher that after being in the DeFi industry for so long, he has seen platforms shut down, sell coins and dump stocks, and run away. dYdX is the first to directly sell its trading platform.
Although dYdX V3 is an older version of the product, the platform's trading data performance is still impressive. According to DeFiLlama data, the V3 platform is expected to generate approximately $18.67 million in revenue this year.
VanEck estimated in a report last March that the V3 platform generated $137 million in fees in 2022.
DeFiance Capital also publicly stated last year that although the dYdX V3 product has basically no new trading pairs and functions launched in more than a year, its market share still exceeds 50%.
According to DeFiLlama data, dYdX V3’s weekly derivatives trading volume still averages $1.5 billion, and the weekly trading volume on V4 dYdX Chain is approximately $5 billion.
CoinMarketCap data shows that dYdX V3's trading volume still ranks among the top two in the decentralized derivatives sector.
According to analysis by crypto risk firm Gauntlet, the V3 platform remains attractive to traders because some tokens on the platform have higher liquidity and traders face less slippage on large trades.
User Bobo also mentioned to ChainCatcher that he still uses V3 the most and rarely uses V4 because the asset trading volume and liquidity of this version seem to be very low.
From this point of view, dYdX V3 is still a continuous cash cow. It is reported that the business transaction of V3 sale will reach hundreds of millions of dollars.
Since its launch on the Ethereum network in 2017, the business has grown rapidly under the liquidity mining incentive policy during the DeFi Summer period. The dYdX product has also undergone countless major changes. The product has been upgraded from the initial V1 to today's V5 version. After escaping Ethereum, it launched dYdXChain and became the king of the mountain.
However, the business development of dYdX is quite different from the price trend of DYDX. The price of DYDX has plummeted from its high of US$27 in 2021, and its lowest point has fallen to around US$1.005 many times. It is now fluctuating around US$1.25, and the price of the coin has shrunk by 95% compared to the high point.
Although after the launch of V4 dYdX Chain, all on-chain transaction fee income belongs to DYDX token staking users, etc., providing more empowerment, it has no impact on the coin price.
There are two main views on dYdX's sale of V3. One is the negative view that the project party wants to cash out, and the other is the positive view that the funds obtained from the project party's sale will be beneficial to the overall development of dYdX.
Bobo said that it would undoubtedly be a good thing if dYdX invested its sale funds into the dYdX ecosystem.
He explained that as a fast-growing DeFi company, dYdX needs a lot of funds to support its technology research and development and market expansion. The sale of the V3 platform can raise a lot of funds for it, helping it to concentrate its energy and resources and improve its overall competitiveness.
In the long run, the sale of the V3 platform may also have a positive impact on the value of the DYDX token. By obtaining a large amount of funds, dYdX can further improve its technology and services, enhance its market competitiveness, and thus enhance the long-term value of the DYDX token.
He also reminded that currently, regarding the sale of dYdX V3, the official has not stated whether the funds obtained after the sale will be pocketed by the team itself or used for other purposes.
