Degen Chain user loses 90% of funds in bridge transfer to Ethereum's Base due to internal bug

A user of the layer-3 blockchain, Degen Chain, lost 90% of their funds during a bridge transfer to Base, an Ethereum layer-2 protocol, due to an internal bug.

Incident Details

On July 16, Degen Chain user Tempe.degen reported a loss of 785,000 DEGEN tokens, worth nearly $5,000, during a bridge transfer. This loss represented 90% of the total funds being transferred. Following an internal investigation, Degen Chain identified an internal bug as the cause of the issue.

Protocol’s Response

In response to the incident, Degen Chain expressed its intent to compensate all users who lost funds due to the bug. They posted on social media platform X (formerly Twitter):

“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.”

Degen Chain also criticized its service providers for the “terrible service” that led to outages and user fund losses. Despite placing some blame on the service providers, Degen Chain admitted responsibility for not proactively changing providers or demanding a fix. They further stated:

“We’re doing a major shake-up in the coming weeks to ensure we get the best service possible. This won’t be a quick fix, but we will turn things around. Apologies to everyone affected.”

Community Reaction

Despite Degen Chain’s admission of fault and proposed solution, community members expressed their dissatisfaction with the risks associated with bridge transfers. Many critics believe that layer-3 ecosystems, such as Degen Chain, are not yet ready for mainstream adoption due to frequent outages and security issues.

Industry Context

The incident comes at a time when Ethereum layer-2 scaling solution provider Optimism has announced plans to onboard layer-3 applications on top of the OP Stack. The OP Stack is an open standard codebase that powers development on Superchain. Optimism stated that the OP Stack “isn’t limited to L2 chain deployers and app builders,” but can also be utilized by an ecosystem of L3s.

This incident highlights the ongoing challenges and risks within the layer-3 blockchain space, emphasizing the need for robust security measures and reliable service providers to ensure user trust and mainstream acceptance.