Jackpot! User turns $200 into $250K thanks to a buggy DeFi protocol

An anonymous user has revealed how he made $250k in profits from a minor investment in a cloned version of Yearn.finance called Soft Yearn (SYFI).

The token SYFI was launched as a soft-pegged adaptive cryptocurrency that expands or contracts its supply automatically. The concept was popularized by Ampleforth which uses a rebasing mechanism to adjust the supply to reflect changes in demand.

However, the Uniswap price of the cloned token was not adjusted to account for the rebase and the trader managed to sell the tokens at the previous price, wiping out virtually all of the liquidity in the pool. A flaw in the SYFI-rebasing mechanism allowed the anonymous user to obtain a large amount of tokens during its first rebase on September 3.

A DeFi trader using the Twitter handle Amplify has admitted that he was the one who netted 740 ETH from an initial investment of just 0.5 ETH. This works out at roughly a $250,000 return for a $200 layout.

1/ Take it as you will:I am the person who sold $SYFI on uniswap at the same time as the Rebase. Or, I am the person who exploited the rebase bug in $SYFI. Or, I am the malicious actor who pulled the rug on innocent chads.

— Amplify (@A_mplify) September 7, 2020

The DeFi user has a minimum wage job and works from home to support his family. He also has a small trading account to work from. Having experimented with a number of different trading techniques the user said that he regularly ‘apes’ into fresh Uniswap listings after confirming project’s credibility.

Following the FOMO surrounding SYFI, this is what he did just before the rebase with 2 SYFI bought for $100 each.

I am staring at the Uniswap UI with bated breath when the 2 SYFI turns into 15,551, and subsequently the price quote for these tokens being over 740ETH.

The anonymous user said he did not go out to intentionally exploit this code or hack into the smart contracts, admitting that the extraordinary profit was an accident;

I did not have any intent to hurt anyone. I did not want the SYFI team to fail. There was never any malicious intent here. I saw an opportunity, or trade if you will, and I took it.

The SYFI token surged in price initially, as a lot of DeFi food tokens have done recently, but within a day had collapsed to virtually nothing as the bug in the protocol was exploited.

There was another bug in the code which also affected the rebase pricing mechanism. Soft Yearn Finance posted an explanation at the time of the exploit.

The Soft Yearn project has lost most of whatever reputation it had and liquidity and volumes have completely dissipated according to Uniswap analytics. It claims to be working on SYFI v2 which will provide a fix for the unaudited code, but it may be too little too late.