en.cryptonomist.ch
downloadThe DeFi Wonderland project has practically imploded.
Wonderland, the price collapse of the DeFi project
In fact, the price of the TIME token has lost 96% of its value since its peak on 7 November, only 3 months ago.
Even Wonderful Memories (WMEMO) and Spell Token (SPELL) have recorded heavy losses from the highs of November, amounting to almost 80% of their value.
The main problem has been the discovering that one of the founders of Wonderland, who was hiding under the pseudonym 0xSifu, actually turned out to be Michael Patryn, famous for having been the co-founder of the Canadian exchange QuadrigaCX, which went bankrupt some time ago.
In the past few days, there have been many chain liquidations, caused precisely by the dump of TIME, below the backing price of the reserve. This should have triggered buybacks, which instead did not happen.
At this point, many investors have felt cheated, and a real case has broken out, which sees somehow involved the other co-founder, Daniele “Sesta” Sestagalli.
The possible solutions
Sesta has declared that he wants to reimburse those who have lost funds due to this problem, saying he is not guilty of the problem and placing the entire responsibility on 0xSifu. However, 0xSifu is nowhere to be found.
A merger of Wonderland with Abracadabra was also proposed, in order to transfer the treasury of Wonderland in Abracadabra. In this way new SPELL tokens could be mined to purchase TIME, hypothetically bringing it back to fair value. The downside would be that SPELL would become more inflationary.
MAJOR FROG NATION ALPHA
There is a proposal to COMBINE Wonderland and Abracadabra into ONE protocol.@danielesesta conducted an AMA on the proposal.
• Details of the merger
• The upside for both protocols
• The # and $
• What I think of itHere's the alpha:
🧵 pic.twitter.com/paZ7uUBoTs
— The DeFi Edge 🗡 (@thedefiedge) January 26, 2022
This solution does not please many people, both because many have lost confidence in the Wonderland development team and because of the inevitable increase in SPELL’s inflatability.
Sesta is trying to do everything possible to repair the problems of liquidation, and the reputational damage, but it seems a difficult goal to achieve.
In fact, the solution to the liquidation problem is not painless, and the loss of reputation risks being irreparable.
The risk of DeFi projects
Events like this show how high is the risk of investing or betting on early-stage DeFi protocols that have not yet had time to prove themselves.
It will certainly not be the last time someone will lose funds by putting them on insecure or fraudulent decentralized finance protocols.