Author: Golden Finance reporter Jessy
Recently, there has been unrest on the Base chain, Coinbase's own layer 2 project.
First, the largest Meme coin project, Bald, repeatedly withdrew funds from the liquidity pool after injecting large amounts of funds into the market in the early stage, and was suspected of malicious market manipulation, causing the price of Bald to soar 2,000 times in less than 24 hours and plummet to nearly zero. Once, the market value of this project exceeded 100 million US dollars in just 2 days, and the liquidity scale in the fund pool also exceeded 25 million US dollars.
It is precisely under the impetus of the Bald project that the TVL, number of users, and transaction volume on the Base chain have increased dramatically. On July 30, the assets on the Base chain began to surge, which has exceeded the total number of assets on the chain before. On July 31, when Bald surged, there were more than 80 million US dollars, of which 60 million US dollars were added on July 30 and July 31.
Affected by Bald, other local dog projects on the Base chain also fell, and most meme projects fell by 90% or more. When Bald soared, these projects also rose by at least ten times.
The current problem is that if users want to cross-chain their assets from the Base chain, they will have to wait for a long time, because the official cross-chain bridge of Base has not yet been officially opened to all users, and the third-party cross-chain bridge cannot bear the excessive cross-chain funds. These funds stranded on Base include more than 10,000 ETH of the Base project.
Before one crisis is over, another one arises. Then LeetSwap, the largest Dex on Base, said that some of its liquidity pools may have been attacked and trading has been suspended for investigation.
On August 2, the deployer of Bald announced on Twitter that all profits from Bald would be donated to non-profit organizations. Has Bald, a meme project that grew 1,000 times overnight, been "run away"? How did such a not-so-clever scam fool the public?
Undisguised malicious market manipulation
This is a story of malicious market manipulation, which is not uncommon in the cryptocurrency circle, but it is not common for the project owner to "run away" from a 2,000-fold increase in just two days.
Through the data analysis on Debank, we can find that the project's deployment address began to inject ETH into Bald's liquidity pool as early as 2023/07/30 02:58:33. The address transferred multiple ETH to the liquidity pool, totaling more than 6470 ETH, and from 2023/07/31 19:38:55, the address began to withdraw ETH from the liquidity pool, withdrawing a total of more than 10704 ETH in four ratios. Then, from 2023/07/31 20:49:01, a total of 400 ETH was injected into the liquidity pool in three ratios, and then ETH was withdrawn and injected again, but it was all in and out of a few hundred. At 2023/08/01 09:47:01, the wallet of the deployment project finally stopped operating the liquidity pool, and the last operation stopped at withdrawing a liquidity of 60 ETH.
According to the summary and analysis of on-chain data analyst Yu Jin, at 7 pm on July 31, the BALD project began to use 1160 ETH ($2.17M) to repurchase 29.78 million BALD, and the BALD price rose from $0.055 to a maximum of $0.09; during the repurchase, the project withdrew 10704 ETH ($20M) + 224 million BALD liquidity from the pool, causing the pool depth to drop sharply and the market panic, and the BALD price fell from $0.09 to $0.02; after the drop, the project only added 400 ETH ($0.75M) + 18.08 million BALD liquidity.
At 9 pm on July 31, the project team withdrew the 400 ETH ($0.75M) + 18.08 million BALD liquidity that had just been added... Now the BALD pool has only 8 ETH depth, and the BALD price has fallen to $0.004.
According to Dexscreener data, as of press time, the price of BALD was $ 0.0006062, with only $ 153,000 in liquidity.
Less than 24 hours after the Bald project was launched, it soared more than 2,000 times. Like many projects, this is also due to the high degree of control of the project owner. In the early stage of BALD operation, the project deployer continued to add liquidity to the fund pool. For a new chain that has just been launched and a newly launched meme coin, the amount of investment is astonishing. It is precisely because the project owner is so arrogant that everyone speculates that Coinbase is behind the project, and speculators also inject funds into the base chain. Indeed, it is also driven by Bald that a large amount of funds have poured into the base chain. When Bald soared, the assets on the base chain began to surge. Now there are more than 80 million US dollars, of which 60 million US dollars were added on July 30 and July 31.
It can be said that it is people’s Fomo bald sentiment that has led to a surge in funds on Base.
In addition to being a highly controlled project by the project owner, there are also insider trading. According to lookonchain’s detection, four addresses withdrew 0.5 ETH from Bybit to Base at the same time, and purchased BALD with 0.534 ETH four minutes after the opening of BALD, totaling 50 million, accounting for 5% of the total Bald. Later, during the rise of BALD, 37 million were sold and exchanged for 554 ETH.
A Fomo with only money in and money out
Looking back at the incident, Bald is not the kind of Pixiu that designs various codes in the contract so that users can only enter but not exit. A blockchain technology engineer told Golden Finance reporters that the problem with Bald is that it did not achieve "fair launch". Generally, most Memecoins will throw LP into a "black hole", which means an address where no one has a private key, similar to an address starting with "0x0", so as to ensure that the pool is not controlled by anyone. Generally, users can go to the blockchain browser to check whether the Owner of the LP Token is a black hole address, that is, to determine whether the project is fair launch.
But it is obvious that the lp of Bald's project is not a black hole address. However, such a loophole did not attract everyone's attention. After the Fomo sentiment on Base, people had already lost this most basic common sense.
The Base chain has not yet been officially launched on the mainnet, and its official cross-chain bridge is still only accessible to developers. For security reasons, the Base official cross-chain bridge currently only supports the entry of ETH and does not support the ETH printed on the Base chain to cross back to the mainnet. Because the Base chain is still in the development and testing stage, it is possible that problems such as over-issuance of Ethereum may occur due to security issues or vulnerabilities.
The myth of Base’s 1,000-fold increase in one day and the rise of various meme coins are also related to the fact that the Base chain has not yet been officially launched on the mainnet. Because funds can only enter but not exit, funds flow between various memes, and then create various scenarios of 10-100 times in one day and then plummeting.
(Although it is currently not possible to withdraw ETH back to the mainnet through the official cross-chain bridge, it can be achieved by running a withdrawal script, but this method is too complicated and requires waiting for seven days to be implemented.)
The private key of the pool is in the hands of the protocol deployer, and the project owner can control the project at any time. Moreover, the contract of the project itself has not been audited for security. Underneath these illusory prosperity, there are actually lies that are very easy to expose.
When Fomo was in high spirits, these basic common senses had long been ignored. People were concerned about whether they could get in and make a profit, and whether they would be the last one to take over. Many big Vs on Twitter who often attacked local dogs could not escape this disaster this time. @币圈慈善家 tweeted that the project party withdrew the pool ten minutes after he bought in, and the funds he rushed in plummeted by 80%. Blogger @Maswei.zk invested 10,000 U, and only had 300 U left in less than 24 hours.
However, in the wallet of the project deployer, there is a huge amount of US$28.23 billion in funds on the Base chain.
The fruits belong to the brave, not the fools.
Before one wave subsides, another wave rises.
On August 1, LeetSwap, the largest Dex on the Base chain, was reported to have been hacked. The attacker obtained a total of 340 ETH, about 630,000 US dollars, and the official team had to suspend all transactions.
According to the analysis of Web3 security team Beosin, the cause was confirmed to be the price manipulation attack on the axlUSD/WETH pool in the LeetSwap platform. The hacker mainly used a specific public function in the pairing contract to allow it to transfer axlUSD in the pairing contract, thereby raising the price of the token. The attacker then sold the token to obtain ETH profits.
On July 31, LeetSwap attracted a large number of retail investors due to the surge in BALD, and the 24-hour trading volume once exceeded 230 million US dollars. Moreover, 49% of the trading volume came from BALD. Among the top ten trading pairs, except for its own platform currency LEET, the rest are Meme coins.
A Layer 2 that has not been officially opened to users has attracted so much money, and it is also a big test for Base. Obviously, the Base chain did not pass this test. Because of the negative impact of Bald's escape, users also called Base the escape chain. However, there are more people with low IQ who rushed in to make quick money without even seeing some obvious pitfalls.
In addition to the plunge of Bald, there are still many Meme coins on the Base chain that are Pixiu disks. That is, due to the writing of the contract, only designated users can sell tokens, and other users' money can only be "in but not out". According to the revelation of crypto investor Axel Bitblaze, for example, the BASED project is a typical Pixiu disk - only the creator of the contract and a few whitelisted people have the right to sell tokens. When Axel Bitblaze wanted to sell the token that he had increased tenfold, he was reminded of an "internal JSON-RPC error" and was unable to sell it. Golden Finance reporters also saw someone in the community selling a set of source code for the MEME coin on Base, which can be purchased for 2000U.
The crypto market is indeed a dark forest. Gambling on Layer 2, which is not yet fully open to users, should carry greater risks. Only the brave ones who can bear risks can reap greater fruits of victory, but the prerequisite is that the warrior must be clear-headed.