Security

Avalanche-based protocol rug-pulled within hours of its debut

  • Avalanche based Atom protocol suffers rug pull just after its launch
  • The scam brings about deleting of all the social platforms for Atom Protocol
  • Many users suffer with the downfall of the Avalanche based protocol

Scams, hacks, rug pulls, and exploits are all prevalent in the world of cryptocurrency. The industry has developed a negative reputation because it is decentralized and anonymous, with many scam artists emerging. Although numerous inspections and enrolment requirements have been implemented, billions of dollars are still lost each year.

This week, after Atom Protocol, an Avalanche-based DeFi platform, was reportedly rug pulled in just a day of launching, the shortcomings of current verification systems were brought to light. On February 20th, the creators of this technology launched a rather “polite” announcement on Twitter before deleting all of their social media accounts.

Its Discord chat was subsequently shut down, as well. Furthermore, the $ATM token sale has been halted, with the coin’s price crashing dramatically. Many individuals are furious about the fact that protocol was pulled without a KYC procedure, even though one existed. Customers are asking Assure DeFi questions after it completed the KYC for Atom Protocol in search of accountability.

Users turn to blame the entire Atom protocol and its associates

Many people took to Twitter and are now upset because the protocol was rug-pulled despite having a KYC process. Users are now puzzled about Assure DeFi’s team since they are responsible for the KYC process. Assure DeFi, on the other hand, tweeted that many people are “misunderstanding the role of KYC/verification.” According to their Twitter thread, “KYC is a deterrent and not a scam prevention”.

The bottom line is that the KYC process was insufficient to prevent this nefarious activity from happening. This example highlights how decentralized and open-source systems are harder to protect than closed systems, where centralized verification processes can be more easily implemented. In addition, Assure DeFi reminded customers that without KYC, no accountability or background identification of any kind would have existed for the protocol. Hence, no avenue for recovering funds may very well be pursued.

Assure DeFi refused these demands for concern of a “public witchhunt,” noting that evidence and understanding on the rug pull may be gathered and verified, after which sent straight to law enforcement authorities if a warrant is obtained.

In a world where people can become whatever they want to on the internet, centralized verification processes have been hard-pressed to develop a system that protects against all forms of fraud and abuse. DeFi protocols may very well bring about a new era of decentralization and distributed systems. Still, the security process needs to be developed and updated continually to protect against fraud.

One of the major benefits of blockchain is that it’s decentralized—a peer-to-peer system with no governing authority. This also means that there is little to no verification or regulation of users, leading some scams and frauds to go unnoticed.

The growing cases of scams in the crypto trading industry

So far this year, scams have been reported with the growing popularity of digital assets. There is also an increasing number of crypto exchanges adding more coins day by day. The situation has made it hard for any investor to trade securely on these platforms. According to Chainalysis’s study, fraudsters steal millions of dollars with malware. As part of its research, Chainalysis noted that the criminals are stealing through online trading platforms by placing an order for any particular cryptocurrency and canceling after receiving the fund.

The report further indicated that scammers could steal $1 million in 5 months. It also pointed out that more than one million people fell prey to scams.

This leaves us asking: What’s next? How will we stop scams and frauds in a decentralized world? Can we ever hope to regulate and verify users without sacrificing too much privacy and anonymity?

This fraud was getting a lot of attention from the Avalanche community, making it even more intriguing.

   

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