Ethereum-focused stablecoin project Beanstalk Farms is the latest victim of another crypto breach. This time, the hackers stole $182 million worth of governance tokens. Since the attack, Beanstalk Farms restarted the protocol.
It said that this incident made the company “stronger” than ever, although they might imply better governance security.
After the flash loan attack last April 2022, Beanstalk Farms deactivated the protocol and governance until August 6. However, just as reopened, the exploit was “replanted.”
Is Beanstalk Farms Truly “Stronger” Now?
Ironically, the mistake from April happened again four months later. Beanstalk Farms claims that it is building a more secure on-chain governance mechanism under the care of BEAN stablecoin developer Publius. According to their statement, the protocol governance has transferred to a multi-sig wallet: a safe managed by the community.
In Publius’ blog, it stated the following:
“Beanstalk has come out on the other end of this ordeal stronger than ever. It is a testament to the creditworthiness of the protocol and its potential to help realize a permissionless future”.
Additionally, the company finished two protocol audits in the auditing firms: Halborn and Trail of Bits.
The team is also developing a new network application with the Root Protocol. The investment cost $9 million, hoping to establish secure marketplaces in the Beanstalk network, including financial, commercial, and sports platforms.
The BEAN stablecoin reached a market value worth $100 million last April, but it has slowly declined due to studies showing that the BEAN project involved illegal funds. It eventually surpassed $10 million last June 2022 to compensate for the lost funds.
However, the project needs more time to break even with the initial metrics before the August 2022 hack.
Looming Fear of Algorithmic Stablecoins
The trust of crypto investors towards algorithmic stablecoins was mainly lost after de-pegging the Terra-based US Dollar, UST, last May 2022. It led to the most disastrous crash in altcoin history as UST was not worth one fiat dollar, and the LUNA tokens went freefalling from an all-time high of $120 to below zero.
Since then, crypto investors have begun questioning the integrity of algorithm-based stablecoins. After all, nobody wants to invest in something that may replicate the LUNA tragedy.
In the case of BEAN, even the developers do not guarantee safety. Publius said, “The thing about a system like Beanstalk is that it works until it doesn’t. You can never actually know if it works, only that it has worked so far. So much uncertainty is scary, particularly without a clear definition of success.”