Waves DEX users report withdrawal issues for USDT and USDC

Waves DEX users on the decentralized exchange have been unable to withdraw funds from the network’s internal protocol for several months. ForkLog spoke to the affected users themselves.

According to one client, more than 200 000 Neutrino USD (USDN) are blocked on his account. The platform has introduced daily withdrawal limits — no more than 100 000 USDN (about $35,000) for all users.

A Twitter user with the handle Cryptohippo said that withdrawing stablecoins from Waves DEX via the Ethereum bridge took him 10 hours instead of the system’s eight minutes.

Update: my USDC withdrawal went through after 10 hours, when the transfer time was estimated to be just 8 minutes.

I will be trying more withdrawals to see if they simply sent the money to stop the story, as I asked customer support if the money was gone, and I got radio silence

— Cryptohippo (@cryptohippo65) January 14, 2023

Cryptohippo intends to continue withdrawals to test the system.

According to open statistics, on the Ethereum bridge Waves DEX almost none of USDC and USDT remain. On one of the addresses at the time of writing there are only 172 USDT.

Where the funds went is unknown. Meanwhile official data on the Waves DEX protocol’s capitalization show that the on-chain supply of USDT and USDC is 26.6 million and 16.5 million respectively.

According to Protos, “over the last two months a significant portion of USDT and USDC moved to Binance wallets, while Waves DEX staff confirmed that they periodically withdraw coins from their gateways to cold wallets.”

However journalists could not confirm whether Waves DEX stores or trades cryptocurrencies on Binance.

A representative of HAPI Labs, in commenting to ForkLog, explained that Waves DEX uses a centralized gateway, i.e. “withdrawal is performed as with a centralized exchange.” For this reason it is impossible to determine the exact number of users who initiated withdrawals and have not yet received their funds.

«Messages about liquidity shortages of the official Waves gateway for interacting with other blockchains have been coming for over a year, and for more than half a year the liquidity crunch has been very acute», — he said.

The expert noted that this address is centrally controlled by the Waves team and has repeatedly been suspected by users of fraudulent schemes related to phishing and money laundering.

«The team has never responded to numerous user complaints, has not frozen funds after thefts and hacks, has not helped in any investigation. We have not found any official response or statement about any countermeasures against attacks on network users», — added an analyst from HAPI Labs.

According to him, the situation is worsening:

«Due to the depeg and rising hype, the number of people wanting to withdraw USDN is increasing and will probably soon be roughly equal to the entire circulating supply».

According to public statistics, 84,431,545 USDN are currently staked in Neutrino, out of a total supply of 629,984,944 USDN. With the daily limits in place, full withdrawal would take about 2.5 years. Analysts suggest the restrictions were introduced due to a banal shortage of funds to redeem USDN and issue USDT/USDC.

«They used liquid stablecoins for a Pump & Dump of their WAVES token in the spring — this is not proven, but there was a lot of material on this at the time. They do not want to redeem obligations using Waves, as this would trigger a new wave of dumping the native WAVES token. Therefore they decided to issue a teaspoon per day, drag out time and look for a solution, though it is not guaranteed that they are seeking one», — summarized a representative of HAPI Labs.

According to Protos, Waves Platform CEO and founder Sasha Ivanov oversees most aspects of the Waves network, including the algorithmic stablecoin USDN and Waves DEX. There is no public information on this.

Users have created a separate channel with his sarcastic replies regarding the issues they have faced.

On 17 January, Ivanov posted in Telegram a statement regarding the USDN token, which, in his words, “collapsed as a stablecoin, but is not dead yet”.

«Its architecture proved unsuitable for a stablecoin with a hard peg. But this will be enough for another interesting financial product, namely the ecosystem index. It does not require a hard peg; it simply needs to track a portfolio of selected ecosystem tokens. We are gradually abandoning USDN as a stablecoin, but reviving it as a new asset with a new value and utility», — wrote him.

Separately, Ivanov stressed that after the protocol update the USDN price could end up both below $1 and above.

Recall that in late 2022 the Waves CEO announced plans to update the blockchain of his project to version 2.0 in 2023.

Prior to this, Ivanov announced the launch of a new stablecoin, whose prospects prompted doubt among users. The platform’s developers also presented a recapitalisation plan for USDN. The algorithmic stablecoin lost its peg to the US dollar in late August and has yet to restore the peg.

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