KyberSwap Responds to User’s Swap of 2 Million USD but Only Receiving 0.05 USD

As the world becomes more digitized, cryptocurrencies and decentralized finance (DeFi) have been on the rise. However, as with any new technology, there are bound to be hiccups along the way. On March 11th, Kyber Network’s DeFi project, KyberSwap, admitted that users had encountered issues while trading, resulting in significant losses.

The incident was brought to Kyber Network’s attention when a user attempted to swap $2 million worth of tokens on KyberSwap, only to receive 0.05 USDT in return, causing an uproar in the DeFi community.

Specifically, the user attempted to swap 3CRV, which is a token that provides liquidity to Curve’s 3pool, for the stablecoin USDT. However, ordinarily, users would convert 3CRV back to a stablecoin directly on Curve, rather than trading it on a decentralized exchange (DEX) like KyberSwap.

As a result, KyberSwap had difficulty locating a swap that met the user’s request, ultimately returning the result of the 3CRV/USDC pool on Uniswap v2, which had extremely poor liquidity, with only 2 USDC available and having been inactive for 251 days.

The user then swapped the USDC for USDT, likely due to the panic caused by USDC continuously depegging on March 11th, ignoring the KyberSwap interface showing that the swap result would be significantly lower than the original amount. The result was that the user swapped $2 million worth of 3CRV tokens for only 0.054 USDC. KyberSwap then converted the 0.054 USDC to 0.051 USDT and sent it back to the user’s wallet.

After the transaction was completed, an MEV bot detected the pool imbalance and deposited 1.41 USDC into the pool before withdrawing the $2 million worth of 3CRV tokens. To ensure the transaction was completed as quickly as possible, the MEV attached a transaction to deposit USDC into the pool, with fees amounting to 23.7 ETH (approximately $39,000).

The issue with the transaction lies on both sides: the user choosing an unusual method of converting assets without setting up precautions against slippage and KyberSwap routing the transaction to a “dead” pool.

KyberSwap confirmed the incident on March 11th, stating that they had proposed a swap option with a reasonable exchange rate, which the user had accepted.

However, due to the significant volatility in the cryptocurrency market on March 11th, KyberSwap’s router function could not estimate the necessary gas fees for a feasible swap. After some searching, it could only estimate gas for the Uniswap v2 pool via 0x and offered the option to the user again.

Despite the significant difference in exchange rates, the user chose to swap again after being presented with the new information, resulting in the small amount of USDT received. KyberSwap attempted to simulate the conditions that led to the transaction, with results that were nearly identical.

Kyber admitted that their swap interface needed to be adjusted to display estimated swap results more prominently. Furthermore, the project is considering implementing safeguards to prevent users from trading in unfavorable conditions.

Kyber Network is one of the most popular DeFi projects, providing a decentralized exchange that supports a wide range of tokens. This incident highlights the risks associated with the DeFi space and the importance of due diligence in choosing an exchange and understanding how the system works. As the cryptocurrency market continues to grow, it is crucial for users to remain vigilant and informed about the risks and benefits of decentralized finance.

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