KyberSwap attacker used ‘infinite money glitch,’ Australia’s tax agency won’t clarify DeFi rules: Finance Redefined

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Wel­come to Finance Rede­fined, your week­ly dose of essen­tial decen­tral­ized finance (DeFi) insights — a newslet­ter craft­ed to bring you the most sig­nif­i­cant devel­op­ments from the past week.

The attack­er who stole $46 mil­lion from the Kyber­Swap pro­to­col has used a com­plex strat­e­gy described by a DeFi expert as an “infi­nite mon­ey glitch.” With the exploit, the attack­ers tricked the platform’s smart con­tract into believ­ing it had more liq­uid­i­ty avail­able than it did. 

Australia’s tax reg­u­la­tor has failed to clar­i­fy its rules on DeFi despite Coin­tele­graph reach­ing out for answers. The reg­u­la­tor could not answer whether cap­i­tal gains tax­es apply to liq­uid stak­ing and trans­fer­ring assets to layer‑2 bridges. 

The DeFi ecosys­tem flour­ished in the past week thanks to ongo­ing bull­ish mar­ket momen­tum, with most of the tokens trad­ing in green on the week­ly charts.

KyberSwap attacker used “infinite money glitch” to drain funds — DeFi expert

DeFi expert Doug Colkitt laid out a thread on X (for­mer­ly Twit­ter), describ­ing the smart con­tract exploit engi­neered by the Kyber­Swap attack­er who drained $46 mil­lion from the protocol. 

Colkitt described the exploit as an “infi­nite mon­ey glitch,” where the hack­ers tricked the smart con­tract into believ­ing that Kyber­Swap had more liq­uid­i­ty than it real­ly had. Colkitt also high­light­ed that it’s the “most com­plex” smart con­tract he’s ever seen. 

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Australia’s tax agency won’t clarify its confusing, “aggressive” crypto rules

On Nov. 9, the Aus­tralian Tax­a­tion Office (ATO) released new guid­ance on DeFi. How­ev­er, the reg­u­la­tor failed to clar­i­fy whether cap­i­tal gains tax­es apply to var­i­ous DeFi fea­tures, such as liq­uid stak­ing and send­ing funds to layer‑2 bridges. 

Coin­tele­graph reached out to the ATO to clar­i­fy the new rules. How­ev­er, a spokesper­son from ATO said that the tax con­se­quences of a trans­ac­tion “will depend on the steps tak­en on the plat­form or con­tract, and the rel­e­vant sur­round­ing facts and cir­cum­stances of the tax­pay­er who owns the cryp­tocur­ren­cy assets.”

With the non-answer, investors could be unable to com­ply with the pos­si­ble con­se­quences of the unclear guidance. 

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DYdX founder blames v3 central components for “targeted attack,” involves FBI

Anto­nio Juliano, the founder of DeFi pro­to­col dYdX, went on X to share the find­ings of the inves­ti­ga­tion into the $9 mil­lion insur­ance funds with­in the plat­form. Juliano said the dYdX blockchain was not com­pro­mised and not­ed that the insur­ance claims hap­pened on the v3 chain. The fund was being used to fill gaps with­in the Yearn.finance liq­ui­da­tion processes. 

The dYdX founder also expressed that instead of nego­ti­at­ing with the exploiters, the pro­to­col will offer boun­ties to those most help­ful in the inves­ti­ga­tion. “We will not pay boun­ties to, or nego­ti­ate with the attack­er,” Juliano wrote. 

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DeFi market overview

Data from Coin­tele­graph Mar­kets Pro and Trad­ingView shows that DeFi’s top 100 tokens by mar­ket cap­i­tal­iza­tion had a bull­ish week, with most tokens trad­ing in green on the week­ly charts. The total val­ue locked into DeFi pro­to­cols remained above $47 billion.

Thanks for read­ing our sum­ma­ry of this week’s most impact­ful DeFi devel­op­ments. Join us next Fri­day for more sto­ries, insights and edu­ca­tion regard­ing this dynam­i­cal­ly advanc­ing space.

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