What next for ZkSync Era as the ecosystem suffers its first rugpull
- ZkSync Era’s revenue aggregator lost its entire TVL in rugpull.
- KAVA crashed as investors dumped their coins following the incident.
The ZkSync Era network has been rapidly gaining popularity as the first Ethereum layer 2 network to introduce ZK rollups. As such, we have seen a surge in users, and the number of projects launching on it.
The ZkSync Era honeymoon might have just come to an end courtesy of a rugpull in one of its projects. According to recent reports, Kannagi Finance, a revenue aggregator running on ZkSync Era has rugpulled its users by draining all of its TVL.
The zkSync Era revenue aggregator protocol Kannagi Finance has RugPulled, and its official website have expired.
The TVL of Kannagi Finance was $2.13 million yesterday, and the current TVL has almost returned to zero, so the estimated user loss is $2.13m. The Kannagi Finance…
— Wu Blockchain (@WuBlockchain) July 29, 2023
Kannagi Finance had roughly $2.13 million in TVL as of Friday but malicious actors drained all of those funds in a matter of hours. This event occurred less than 2 months after the aggregator protocol’s audit by the SolidProof audit agency.
How has the incident impacted ZkSync Era?
Bad news especially related to rugpulls tend to have a negative impact on user sentiment. As a result, many investors withdraw their funds due to the FUD associated with such events. But is that the case for ZkSync Era? Well, its TVL peaked at $193.9 million on 17 July but it has since dropped to its $163.91 million TVL at press time.
It was worth noting that the observed TVL decline started days before the rugpull. This means there is a significant possibility that we might see extended TVL outflows. However, initial reports suggest that the incident was isolated to Kannagi Finance.
Now that we have assessed the TVL, it is clear that the potential impact will be limited especially if contained to just Kannagi Finance. The latter’s TVL represents a small proportion compared to the overall ZkSync ERA TVL.
Perhaps the impact of the rugpull would have been felt on ZkSync Era’s native token if it was available but it is not. However, it does appear that the incident had a massive impact on Kannagi Finance’s native token KANA. The latter traded as high as $0.022 at its highest point in the last 4 weeks. This was earlier in the first week of July.
KANA’s price action has been gradually sliding lower in the last 3 days but fell off a proverbial cliff in the last 24 hours at press time. It tanked by 98% in the last 24 hours, confirming that the drained TVL created a crisis of confidence among investors.