DeFi Panic After MASSIVE Exploit!🔥XRP Contagion Exposure?🚨Flare CEO INTERVIEW

本站添加: 2026-05-04

[00:00:00]A layer zero hack hits us over the weekend and we'll break it all down for you. I've got a special interview also with Hugo coming in from uh Flare Networks. Before we get started, I do want to thank our sponsor and that is Tandem. This is where self custody comes into play. This is the best thing to do guys is stay in self custody. And what I would say is right now under the conditions that we are in and I'll talk about this more is make sure you are not exposed to DeFi in any way. That's the safe route. It is going to be hopefully a temporary fix, but right now self- custody, take a look at it. Just jump into our link and uh get your own tantrum self- custody going. If you're brand new to crypto, this is the best place to do it. So, as you know, the Kelp DAO incident hit over the weekend.

[00:00:43]A lot of things happened. Keldow was exploited for approximately 290 million.

[00:00:48]Preliminary indicators suggest attribution to a highly sophisticated state actor.

[00:00:53]Maybe at I'm questioning everything right now because you look at the amount of Bitcoin that say a Lazarus group or possibly even the Chinese have access to. You don't they don't want their assets to go down in value because that would essentially defund a lot of their programs. So I'm just wondering who has the most to gain from this happening at this time like right before Clarity is rolling out. I'm not saying names, but I'm just saying there there may this may not be the bad guys that we think it is uh actually out there. Anything that is supposed to layer zero, this is the issue right now that of course has started to occur. It's not really an issue on a but because a is involved in the transactions that layer zero is in integrated into that's the issue that of course is is perking up and of course that starts to hit the issue of liquidity and a is solvent fully solvent not uh it is not liquid is the issue because there's such a flight of capital right now that are trying to deal with these bad loans. So you've got this occurring and it's not just a we're starting to see this across a lot of different protocols, a lot of different platforms out there. You can kind of see right here. Utilization rate is the issue right there at 100%. So this is most likely going to happen for a little bit longer before we start to see things normalize. And I don't want to get into the the technical details. I'm going to have uh Hugo talk a little bit more about that here in a minute. We'll have him on to break this down. But it is an issue that I think a lot of people need to understand. And the other thing that you look at right now is these bridges continue to really collateral is what I would say is still radioactive in the sides of serious money and the eyes of serious money and and that's the concern I have because now when you have institutional capital not looking at this as an alternative as many of these platforms and many of these institutional players are really trying to figure out what is their roadmap in DeFi. So when you consider it really boils down to bridges. So don't just look at layer zero. You have to look at any any bridge out there. This be wormhole. Even if you look at flare, which we'll talk to Hugo on, but it remains to be seen how much bad debt each one is going to incur. And this is the number of DeFi protocols that are u deal are of course are dealing with reststake ETH. um because this is money leaving DeFi at an unprecedented rate and these are a lot of different areas that aren't really exposed but because of what happened here uh on layer zero and a this of course is what we're dealing with right now further into this uh this of course I think is interesting he he dropped a thread this is a good one too of all the protocols that had to freeze their interop because of the layer zero being compromised if you go down there there's Athena Etherron Curve Finance BitGo Rap Bitcoin all of these were frozen because of this. Even big Pangu came in uh even though it wasn't affected by the rest exploit. Morpho Agora guys this is a big event in crypto and it comes at a very very bad time because what we're dealing with right now is clarity. This of course gets the banks in a position where they could essentially let this die because it really boils down to timing right now in DC and it looks like it's going to continue to be pushed. Timing with this happening right now is just just very very I'm questioning it for sure. All right, so let's go over to this tweet here. AIXBT. This is getting into uh the project of a getting ready to launch a new service and essentially this is going to have exposure that would launch that would have similar assets to what happened here in this exploit. So that may get a complete new roadmap heading forward. And remember a is kind of like the federal reserve for defi and that to me this kind of issue occurring right now with a uh and it's not with a with kelp dowo that's where the vector occurred that of course was because of layer zero this of course though is the assets being affected which of course set in a in most of these scenarios so a lot of things happening right now other things I want to kind of hit on right here this was vitalic four years ago foreshadowing what what's happening right now. I'm optimistic about a multi-chain ecosystem, but the big concern he had was cross-chain applications, bridges, which is what we're talking about. Further into it, the problem gets worse when you go beyond two chains and crosschain activity has an anti-etwork effect. So, this is an issue that has been a problem uh for quite some time and it now has raised its ugly head. And if you guys remember, we did a video with uh the team on uh EEZ, which was one of the ETHC uh advancements that happened at that last conference. And what it simply is designed for is Ethereum going to a bridgeless chain. And this may accelerate a lot of different projects starting to move to that because that was planned for this summer. I just wonder if that's going to have a major implication on that. What I'm a little bit more concerned about right now is XRP. This was a question right here and thoughts on Flare. Uh, and this wasn't in reference to the exploit that just happened. It was just in general there.

[00:06:16]He's asking David Schwarz and he asked they asked him specifically about Flare and he stated that he right now it was a fairly negative and he didn't remember why, but he still didn't like it. He hasn't put much thought to it that time.

[00:06:29]I think they're probably putting some thought to it now. So, we wanted to bring on someone who has exposure to layer zero, that being flare, along with many others, and get their viewpoint on this because this this will at least have somebody that has the kind of situation that could be at risk and what they're doing about it. I want to bring on Hugo from Flare to kind of break it down. Great to have you back, Hugo. How are you?

[00:06:53]>> Great, thanks, Paul. Thanks for having me. some of the takeaways that uh we have on this. We wanted to get your opinion on where you think this is going. First up is let's just go right into crosschain bridges because this of course is the biggest issue right now.

[00:07:08]This adds 100% risk exposure. Uh therefore won't be used by big money going forward. Do you agree that that's probably going to be the case from here forward?

[00:07:17]>> Um no I don't. I think that crosschain bridges are incredibly valuable to be able to take advantage of liquidity and trading conditions on other networks. Um you know if you look uh even Ripple together with uh Hex Trust and um layer zero have just released uh wrapped XRP um on on Salana.

[00:07:38]>> I think it's a question of how bridges are structured, how individual teams that are using bridges are structuring their variable security. So if you look at the hack that happened over the weekend with Kelpdo, pretty much the principal reason for that hack was that kelp were not using uh the recommended even the minimum recommended security setting for uh layer a layer zero type bridge. Layer zero is a messaging service and um you know they at a minimum suggest using two different DVNs. Uh now Kelttow was using one DVN right and therefore if that singular party uh gets um uh gets hacked then then we we we saw what happened.

[00:08:25]>> Everything in blockchain is about minimizing single points of failure and effectively maximizing the number of nodes you have looking at something. Uh so I I'm not not certain that um crosschain bridges are going to go away.

[00:08:41]I'm pretty certain they won't, but I can certainly see that, you know, it certainly gives you pause for thought.

[00:08:47]>> Well, I think to your point is having the redundancy there on these should be the bare. I'm kind of curious though, why would this have not really been, you know, addressed before this of course occurred. I, you know, it's kind of like an obvious too late thing now, but it just seems like this would be a natural redundancy strategy. Why do you think that happened? Yeah, I think look uh as uh as I think it was Donald Romsfeld that said there you know there are known unknowns there are unknown uh and there are unknown unknowns right this security setting was a known thing um you can't you can't protect against every single hack on on any network of any software especially in an age of AI but to do the basic minimum seems to be like a sensible thing that people ought to do and I don't understand why that wasn't done. Do you think that a will whether it's justifiable or unjustly held responsible for other protocols mistakes especially like this as soon as any leverage event happens >> thus you know not even holding the token >> I think when you introduce an asset to a protocol uh and you know I I think Ave has a governance mechanism to do that but I'm not entirely certain it you know it's it's really up to it's up to whatever the governance mechanism or However, an asset is introduced to a protocol.

[00:10:10]>> Yeah.

[00:10:11]>> Uh and you know, if it was governance that approved that, then uh they incorrectly approved it or effectively they should have they should have known and if it wasn't made clear to the token holders who voted to for that that asset to be used as collateral, then you know that's a that's a problem in in and of itself.

[00:10:28]>> Yeah. Uh obviously yields right now are currently too low in DeFi to justify the added risk. Do you think the market's going to adjust any? I very much I see yields increase. Um if you want greater security, you've got to actually see higher yields. Um that you know one of the reasons why you might have lower security is people are not able to earn money from from building applications >> um or it's hard to earn money. So they run smaller teams. So they have less eyes on you know on the target and they have less uh less ability to really quantify the risk they're taking. So I think you know I would like to see yields adjust upwards a lot.

[00:11:09]>> Yeah, they would have to well and this is to your point this would generate a lot more I think security in the in the space.

[00:11:16]>> Absolutely. Absolutely. I I had this conversation tonight. I would like to build uh you know an application uh using Flair's data protocols to be able to analyze the security of lots of various different um applications across the whole space. The reality the reality is that we can build that protocol. I don't know if it could be economically viable.

[00:11:35]>> I see. Do you think the market is going to now assume that every vault is exposed to a hack or potentially a hack panic and and would it add more volatility across DeFi especially TVL going forward.

[00:11:48]>> So I I certainly think people will be analyzing what's what what's in vaults, what the composition of an application is, how where those assets come from, how how are they bridged if they are bridged. Obviously, you will you'll see and h we have seen a very fast removal of capital from applications uh and >> that's the right move. I expect to see a reasonable amount of that being added back over the next couple of weeks, maybe the next month or so as people get to grips with what is in the applicational vault and and how how it is secured. I do think it means that people are going to have to take a a lot more time looking at what's going on within a protocol they're using. I was looking at this tweet right here. This is uh AIXBT and the breakdown uh because it shows the AV v4 they're launching has new collateral framework likely another 4 to6 billion. Uh but here we go with now potentially a forced deleveraging event that could occur. Do you think that would slow things down for assets and liquidity coming back into the market? Um well obviously if there is a forced uh deleveraging event it certainly would uh reduce liquidity coming back into the market because people are not suddenly not able to borrow on those tokens. That said it is that said it is trivial to add uh add more DVNs.

[00:13:10]>> Um you know we we've been looking at this for the last two days. We're adding more DVNs to our uh our FXRP that is bridged out of Flare. So um we use layer zero to bridge FXRP out of flare um and we use our own bridge to bridge XRP from the XRP ledger to Flare. So when you want to bridge from Flare your XRP from Flare to um let's say Ethereum or or Monad or any of those chains we use layer zero. Uh we are also adding uh more DVNs and that's why we're still paused um on on the FXRP bridge out of Flat. Uh I think we'll be adding uh two more DVN. So we're a total of four DVMs.

[00:13:51]>> So you have four versus what kelp out had at one. Um all right. So okay. So explain first the process of how the the exploit occurred cuz uh I think I have a a little bit of a diagram here and maybe you can tell me is this correct? Cuz you got the RPC compromise and then that forced the failover in the DVN. Is that essentially the process in which this occurred? Uh well the RPC's effectively reported um uh false information uh right to to to the those using the chain.

[00:14:25]>> Okay. And then that of course moved. All right. So so in your situation explain how that would not occur >> with regards to >> with with flare. In regards to flare >> with regards to flare with layer zero or or what are we talking about >> on layer zero? Yeah. So for Flair's bridging using layer zero, which again is bridging XRP onto other networks from Flare, it's it's not that it couldn't happen. It's just that we have a much larger set. So we have four DVNs rather than one.

[00:14:53]>> Um so the probability of being able to hack all four simultaneously and it's a four or four uh agreement mechanism. So it's not three of four, it's not two of four, it's four or four. All four DVNs have to agree. So the probability of being able to attack all four simultaneously given they're totally different um clients, they're totally different code bases um is is is you know vanishingly low.

[00:15:16]>> Yeah. All right. So okay, I see your point. Okay. So you look at LRTs right now temporarily very toxic. Do you think the market is just going to focus on LSTs uh to minimize risk?

[00:15:28]>> Uh why would LRTs be toxic? I I think it it's just a specific one. Um I I don't think ones outside of Celtau are affected.

[00:15:38]>> Do you think that the market is at all worried about other LRTs right now? When you look at what happened over the weekend, do we see any kind of contagion potential that could roll out of this?

[00:15:50]>> Uh there would be contagion for LRTs that are using a one of one um uh DVN setup, but this was not a this was not an issue with LRTs itself.

[00:16:01]>> Okay. Okay, so platform freezing uh should be more clearly presented uh on websites and wallets. Um right now everybody's using Twitter to find out what's going on because if you look at over on AI, I'll just jump to their website real quick. You can kind of see there's really no narrative here of explaining something that's happened in the market. It looks like just a regular day in crypto over there. But if you go to Twitter, it's it's quite a bit different. Do you think that should be updated? Um, I think there's certainly UI improvements that could be made, but I I think Ave is also quite good at putting out information.

[00:16:37]>> All right. So, right now, Institutional Capital has been talking about Vault products and launches. We've had several of them on our show. Bitwise, Franklin Templeton, both of them. Do you think they'll end up pausing their upcoming Vault product launches based on the happenings over the weekend?

[00:16:54]>> No, I'd be surprised. Got nothing to do with the vaults.

[00:16:57]>> You think they'll be ready to go? No problem.

[00:17:00]>> What are you What would you be worried about right now that you would say, "Okay, these are are potentially some areas of concern."

[00:17:08]>> I'm worried about the entire attack surface of all code uh with with increasing capabilities of AI. You know, I I think that's fundamentally, you know, something that is a very very big difference and one of the reasons why you're seeing a lot of these hacks.

[00:17:26]Mhm.

[00:17:27]>> Um, you know, I think but I also think it will effectively make everything stronger over the long term. Let's just hope that uh, you know, as many players as possible survive.

[00:17:38]>> Yeah. So, you think it's really just a race right now uh, being able to to fortify a lot of these platforms and protocols based on what these attack vectors are doing at the speed in which they're doing it.

[00:17:51]>> It's the same in web two as as web three. It's everyone everyone's affected.

[00:17:57]>> I think there are some separations. I think for too long DeFi has been working on a kind of we've got to make money as movable as possible.

[00:18:06]>> Uh you know as as able to you know for instance there are very few protocols that put limits on how much can be bridged across chain. So you know one of the things we did if I may shill flare for a second with FX with FXRP um is that we introduced the agent system where agents have to be uh more than three times over collateralized both in stables and in flare. Um so they they have more collateral uh than is is is necessary and this introduces a speed limit on the bridge uh because you you can't mint more than the agents have collateral and the agents take the risk for something going wrong. So that is uh effectively you know we we've thought about at flare we've thought about risk as much as we can made compromises in the protocols in order to alleviate risk uh as much as possible. Does that kind of counteract the whole benefits of what DeFi really is if you if you start to put a lot of these limitations on it?

[00:19:08]>> Uh I mean I think there's a sensible balance between limitations and uh security, right? Um I don't think you need to be able to transfer 290 million across chain uh without anyone asking any qu without any protocol going going hang on what's happening here um and then immediately deposit that as collateral and borrow against it. I think having you know speed bumps in systems you know if someone really wants to get 290 million to a chain they can wait 10 minutes if they want to if that's important to them. I just think that there there's a happy balance and we've we we hope at Flair that we've struck the right balance.

[00:19:48]>> Uh you look at unaffected protocols and tokens right now, they already have shown that they will halt out a precaution even though they're not even related to this hack. You think this is just a short-term people kind of freaking out on this? Again, I think uh there's been so many AI assisted hacks um that people are and and we paused FXRP and it's still paused um that you know, you just don't necessarily know what's happening until, you know, especially if you're all, you know, relying on on something um you want to know what the the details are before you um allow that risk to propagate. We had the EEZ people on last week talking about the Ethereum economic zone, what that meant for the evolution of bridges.

[00:20:34]Do you think this is going to be an absolute must adopt uh pretty soon?

[00:20:37]>> I don't know anything about the Ethereum economic side.

[00:20:40]>> Okay. All right. Do you think there's enough being done in and and like you mentioned earlier in even in web 2, do you think there's enough being done across all of basically internet and e-commerce and online banking, crypto in general?

[00:20:56]>> Look, everyone who's everyone who's responsible is scrambling as fast as they can to get on get on the glass.

[00:21:04]It's called uh I can't remember what they call it, but the get access to mythos. Um we are um you know we we we want to run Mythos overflare or or get a third party to do so as quickly as possible. Um you know the whole industry uh is you know all the responsible people in the industry are taking this threat extremely seriously. I think banks probably are. I hope they are.

[00:21:29]That said uh they also don't always have the best security. So we'll see. You know >> that's the area that concerns me is just traditional finance.

[00:21:37]>> Yeah. Yeah, >> government's concern government's concern me more. I mean, the >> Oh, yeah. Yeah.

[00:21:43]>> The the amount of information that I suspect is going to be leaked from government databases, it's terrifying.

[00:21:48]>> What's next for Flare? I know I'll see you out at the XRP event, but you guys have anything coming up >> in uh Las Vegas? I think we got a fair few things coming up, but mostly, you know, uh we've been looking now for, I'd say, the last three months at okay, what how do we build out our security even more? And you know, we're that's that's pretty much the whole team's day-to-day job these days is, you know, how do we how do we you know, what what are we doing that we should what are we doing that we shouldn't be doing? What what should we be doing? We're we're upgrading uh F assets to v1.3.

[00:22:23]Um had a lot of security conversations around that. Uh we're still very confident it's it's a very secure version. Uh it'll be tested on Songbird first as as all our protocols are. Um but you know uh that will the the upgrade to v1.3 will be amazing because uh one you'll be able to mint directly against the core vault. This means that uh you you'll be able to mint more.

[00:22:47]We've had to design new security parameters for that. So that uh you can only mint a certain amount from the against the core vault before um uh before there's a cutoff. Lots of dynamic security aspects. I mean, I I could break down here how how the FA ass how the FXRP system works, which, you know, is is quite a lengthy conversation. Um, but one of the things coming up in V 1.3 is the ability to mint tag. So, you'll be able to mint FXRP with XRP directly from uh an exchange, which I think is quite nice.

[00:23:19]>> Yeah, that will be good. Okay. So, your current situation right now with F assets, what protocol are you guys under right now as all of this is going on?

[00:23:29]And when what is the timeline for this to play out for you?

[00:23:34]>> So uh for F assets right now we're on V 1.2. U we'll be upgrading to V1.3 uh on Songbird I would imagine next week or so. Uh test it for a period of time on Songbird um and then upgrade it to Flair. Really exciting to have mint tag because you can just withdraw XRP from any exchange to Flair.

[00:23:54]>> That's going to be cool. I love it. F assets, XRP being affected right now.

[00:24:00]Obviously protocol, you guys freezing assets to kind of, you know, deal with the security elements. What is next step for you on getting that back to normal operation?

[00:24:10]>> Yeah. So, uh to be clear, F assets is not frozen. FXRP is definitely not frozen. Operating perfectly as normal on Flare. What is frozen is FXRP uh from Flare to other networks. Okay, >> you can bridge your XRP to Flare and you can bridge it back again absolutely normally. That was never frozen because that doesn't use layer zero. What we use layer zero for is FXRP to Ethereum, FXRP to Monad, FXRP to base and back to Flip.

[00:24:41]Um, we've we've kept that frozen. Uh, we use a higher DVN standard uh than was used by Kelp obviously. Uh but we're now upgrading the DVN standard so that we have more DVNs to make it uh even more secure. So we're we're moving from two DVNs to four DVNs.

[00:24:59]>> How long will that take?

[00:25:00]>> That will take a couple of days.

[00:25:01]>> Okay. So a couple of days on that things back to hopefully back to normal in DeFi here with uh much more security protocols going in place. So it's been it's been good having you on. Thank you so much, Hugo, for jumping in on late notice. We appreciate it.

[00:25:16]>> Thank you so much for your time. All right. So whether you like what Hugo had to say or not, I still think this is the worst issue that has happened in DeFi yet, we are and the reason really boils down to the exposure and the amount of contagion this potentially because a wasn't, you know, just the fact that we have this happening on a because of a layer zero issue alone kind of sets up DeFi in a very bad way. And I think this is at the timing here of what's going on with Clarity and all the regulatory scenarios that are playing out in DC right now. Just not good for crypto today. Now, we're going to cover this uh situation as uh hopefully this starts to resolve out. Of course, the interesting thing here, ETH and Bitcoin both not really affected in terms of price because of what was happening. granted Michael or Michael Sailor and also uh Tom Lee going out and buying exorbitant amounts of both assets maybe to continue to support it. We're going to cover that. There's a lot more happening this week, so stay tuned.

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