Sweet potato mining error! Yam Finance actively advises users to withdraw, stating that YAM 2.0 is expected to be launched.

Just as the newly popular Yam Finance, a yield farming project, was gaining attention, it suffered a setback due to a smart contract flaw. The team voluntarily alerted users to exit, causing a significant drop in the token price. Despite this setback, the team issued an official statement at 5:30 pm today, hinting at the possibility of YAM 2.0.

Previously, developers of YFI also faced allegations of vulnerabilities and threatened to leave the scene. This incident with YAM highlights that the DeFi space is still largely experimental, and speculators should be cautious of risks while acknowledging the efforts of these innovators.

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What Happened?

At 2 a.m. Taiwan time, the Yam Finance team discovered an issue with the smart contract. A vulnerability in the YAM Rebase smart contract caused a significant amount of YAM tokens to flow unexpectedly into the YAM/yCRV liquidity pool on Uniswap. As YAM operates on decentralized governance, even if the team is aware of the error, if the voting threshold for the fix proposal is not met, the vulnerability cannot be remedied, and the funds in the treasury (yCRV) will be locked as a result.

We believe that as long as the voting threshold for the fix proposal is met, we can continue the protocol's operation. Therefore, we quickly mobilized the community to encourage token holders to participate in the governance proposal. Shortly after 7:00 UTC on Thursday, August 13, we submitted a governance proposal, confident that we would receive enough votes.

However, with the help of information security experts, we concluded that the rebaser's vulnerability would interact with the governance module, rendering the proposal unable to execute successfully. Over the past 36 hours, the community has achieved an incredible feat. When we deployed the contract 48 hours ago, we never imagined such massive community coordination could be demonstrated in such a short time.

Current Status of Yam Finance

As long as Ethereum continues to support the YAM smart contract, YAM will persist. It can no longer be corrected through governance, so technically, YAM's future operation will be similar to other supply-adjustment assets (such as AMPL).

The YAM/yCRV liquidity pool in Uniswap V2 will remain in an insecure state indefinitely. Although the YAM community is trying to withdraw 75% of the liquidity from the pool before the second supply adjustment, the remaining assets should be withdrawn as soon as possible.

YAM 2.0

The distribution mechanism and events of the past 36 hours have united YAM into a special community. We believe that such a community deserves the opportunity to continue.

We will seek community funding on Gitcoin Grant to audit the YAM smart contract. If the fundraising goal is met, and the contract passes the audit, we plan to migrate from YAM and launch YAM 2.0.

Once again, we want to thank everyone who participated in the early crazy days of the YAM experiment, especially those who supported us.