Frozen Flare

Trust’n Dem

It’s been a while since I wrote a piece so I decided to talk about trust, and the consequences of trusting without being present.

To illustrate, I will use my experience in Lendflare. I also promoted Lendflare a fair bit, in my style of “this is what it does, research some more, and use it if you like” and figure I should relay my experience and actions therein.

I liked this project, and still do very much like some of its features, but it is broken to some sense.

TLDR on Lendflare

The short of the project is that it grants people the ability to use popular curve LPs as collateral to borrow same type assets without the worry of price induced liquidations.

I have a video here if you need more.
https://www.youtube.com/watch?v=cuM4slVPGB8&

The Issues

There are a few issues about the system that came about as users began to participate that weren’t predictable, or at least apparent.

The main issue is that the lending supply became 100% utilized. This creates a problem of people that “supplied” are not able to withdraw their funds at their leisure.

The utilization problem stems from the fact that borrows don’t pay time based interest, and they choose how long they want there “debt” to be and are charged that interest up front. This does not incentivize people to repay early.

“Why pay now, when I am prepaid to borrow until november?”

Another issue is that because there is no price fluctuation liquidation risk, people folded up their positions. This is an issue, because they were able to borrow more than they collateralized. This allowance requires that more people supply as lenders, than demand for borrows can consume.

This is beyond the fact that the team have ghosted, and not a single member is present in the socials.

Where is the Trust Cer?

So I started out by talking about trust and the risk. So let’s talk about my experience with Lendflare, so you can understand what I was getting at.

When Lendflare was in the design phase, they asked me to look at it. I found an issue and reported it, and sorta worked with them to fix the issue. As a result of “helping out” I was promised an allocation which I got. You can see my LFT locked on my ceazor.eth.

I had a fair amount of discussions with them, and they even became CRE8R Dao clients.

So, I liked the project, and I liked the “team”, well the members I had talked to.

So I put my money in. I used steCRV to borrow a substantial amount of ETH. Thinking it best to avoid extra contract risk, I simply supplied it to be borrowed in return for that interest, and $LFT gov tokens.

The time based feature of Lendflare, caused me to set and forget. But i had reminder in my calendar to return close to end of my period to “unwind”

This is the “being present” part. I didn’t stay in the community, and didn’t see any of the early warnings. The “frenz” from the team didn’t reach out to me when they had issues.

I did DM them when I returned and was told that they all got COVID and were locked up in hotels. To which I know not if it is true or not.

So I found myself in a sticky spot. Unable to withdraw my re-lent borrowed ETH to repay my debt. After finding this out. I started reading and asking about in the discord and discovered the issues that have arisen.

Im not sure if I had been present more, if i could have avoided this issue, as the 100% utilization didn’t come about gradually. But I assume the ghosting, and the utilization were not synchronized.

I guess the lesson to learn here, is to participate in the project discussions and social of the projects you supply to.

Ceazor Exited?

So when I saw the issues, I started finding things that were not outlined in the docs that worried me a bit. The contracts are not simple to follow. They have many many contracts for different asset markets, and for different purposes. It’s not easy to see your own position data via etherscan/brownie. And I still haven’t figured out how to see the “upcoming liquidatable” positions. Also there is a feature that i find VERY perplexing.

Positions that are past due CAN NOT be repaid and must be liquidated.
(I attempted to find the code again but could not, so this statement could be wrong. It was a `require(…!expired)` type)

The other thing I found was txns that appeared to be bot frontrunning on withdrawals. I asked about these in the discord and others claimed this was happening.

The txn i found might not have been a bot after all, but appeared to be at a glance.

https://discord.com/channels/909992314024390706/910160384147730463/1023644940338745455

How Did You Exit?

Basically, what I did, was i gathered up the needed ETH to repay my debt, and chose a time that I felt would be less populated. (gas discount benefit too).

Using Flashbot RPC, I repaid my debt and immediately withdrew my supply. Perhaps i was lucky. Perhaps the bot was not hungry anymore. But i was able to exit it all.

Why Did You Exit Early?

I still had more than 1 month of debt to hold, but I decided to repay now.

The reason for this is the team still hasn’t returned from their “COVID lockup” and I worry about the front end expiration. Repaying debt is not fun via the contracts/etherscan, and you need to dig around a lot for your position ID and things like Interest due, and Amount borrowed. I would not like to do this without the frontend.

Since the team hasn’t returned, and I have heard nothing from them in 28 days, I decided it prudent to close this position and move my assets elsewhere.

Other thoughts.

I have a decent track record in defi, but I have lost my fair share of tokens. But this is not my first time trusting and losing.

It’s strange how much money is lost, and how little effect it has on some.

I’m not talking about people fully rekt here.

If you had dropped your wallet with 300usd in it, would you turn the car around and go look for it? How about 3000, or even 30000?

Lendflare was a work of art. It has ingenious ideas, and the code was not a simple task to put together.

I entertain the thoughts that the team truly does have COVID and they didn’t just ghost, but this is seeming less and less likely as time passes, and certain discoveries come to light.

I liked the project, and I liked the team, but was it enough? Seemingly not.

Perhaps the best play is to diversify. As I did not see this coming and if I hadn’t put so much into this project, I wouldn’t have worried so much about the losses. On the other hand, I also wouldn’t have tried so hard to recoup them either.