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Decoding Optimism’s 36% crash and what went on behind the scenes

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Source: Unsplash.com

Just days after its launch, the Optimism’s native token, OP faced its first major hit over a $20 million mistake. The Optimism Foundation ‘accidentally’ transferred 20 million OP tokens to the wrong multi-sig wallet. The error occurred even after two test transactions took place over the chain. Aside from the “lost” tokens, OP prices took a huge slump of over 36% after the news broke.

Not so overpowering

The Optimism Foundation confirmed in a statement that 20 million OP tokens have been sent to the wrong wallet. The tokens were meant to be transferred to Wintermute, a liquidity provider.

Here’s how the faulty transaction occurred as per Optimism:

“Wintermute provided an address to receive the borrowed tokens. The Optimism Foundation sent two separate test transactions, and upon Wintermute’s confirmation for each, sent the rest. Unfortunately, Wintermute later discovered they could not access these tokens because they had provided an address for an Ethereum (L1) multi-sig that they had not yet deployed to Optimism (L2).”

It has since been confirmed that the “attacker” has sold 1 million tokens and can “easily sell the rest”. The OP team further provided a guide for users accessing cross-chain strategy

What is being done?

Meanwhile, the Foundation had made an additional grant to Wintermute following the chaos. The grant of 20 million OP tokens, as confirmed, will be “temporary in nature”. The Optimism team will further look to take a community decision if the address were to affect governance. So far, the address is yet to impact governance on the blockchain. It was also stated that a network upgrade could be carried out to stop the flow of stolen OP tokens.

Wintermute concluded with a threat to the “attacker” stating,

“We are 100% committed to returning all the funds, tracking the person(s) responsible for the exploit, fully doxing them and delivering them to the corresponding juridical system. Remember that robbers need to get lucky every time. Cops only have to get lucky once.”

The crypto community has not been forgiving with a user calling out Wintermute as “amateur hour”. The user, with a 22,000+ following on twitter, also indicated at a potential “inside job” aimed at both parties.

What next fro Optimism?

The price of the OP token took a nosedive after the incident unfolded on June 8 and crashed by more than 35%. The price stood at $1.12 before and dropped around to $0.72 after the confirmation.

Source: CoinMarketCap

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Kanav is a journalist at AMBCrypto. He has a Masters in Media and International Conflict and is interested in areas of digital society, crypto developments in the political sphere and the socio-cultural impact of a crypto-society.

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