A user of the L3 solution Degen Chain, known by the pseudonym Tempe.degen, reported losing 90% of their funds during a cross-chain transfer. The project team blamed third-party service providers for the issue.
According to the affected individual, on July 16, they transferred 900,000 DEGEN in two transactions from the native blockchain to the Base network, but only received 115,000 DEGEN in their wallet. A total of 785,000 DEGEN, worth nearly $5,000, was irretrievably lost.
Upon examining the transaction chain, the user discovered that the Degen Chain bridge does not exchange tokens directly but converts DEGEN to Ethereum, moves it to the Base network, and then swaps ETH back to DEGEN. The loss of funds occurs due to significant price slippage during this series of swaps.
The Degen Chain team conducted an internal investigation and blamed the incident on third-party service providers, one of whom made an update without notification.
1/3 One of our users lost almost 90% of their funds during a bridge transfer from Degen Chain to Base. Bugs like this should never happen, especially when user funds are involved. If you’ve faced a similar problem, we’ll create a form to ensure everyone gets refunded. pic.twitter.com/dcW52FqJS3
— Degen ? (@degentokenbase) July 16, 2024
“We have faced terrible service from our providers, and apologies do not solve this. Service disruptions and loss of user funds are unacceptable, especially from companies that claim to specialize in this,” the developers wrote.
Degen Chain also accepted partial responsibility and promised a “major overhaul in the coming weeks to ensure the best service.” The project has created a form for affected users to claim refunds.
We’ve made a Degen Bridge Claim Form for those who lost funds bridging from Degen Chain to Base. Bridging should be 1:1, so gather your transaction hashes and amounts to get refunded. Sorry for the hassle—your funds shouldn’t be lost over simple bridging! https://t.co/wdvy6rVmcN
— Degen ? (@degentokenbase) July 16, 2024
Launched in March, the meme token Degen on Base monetized activity on the Farcaster social network. The launch of Degen Chain on Arbitrum Orbit in April effectively made it one of the most widespread L3s.
Amid the growing popularity of L3 solutions, Polygon Labs CEO Marc Boiron questioned their necessity for scaling Ethereum, calling them a threat to the security of the main blockchain ecosystem.