Yesterday an article on Crypto.IQ speculated that the YAM protocol, a decentralized finance (DeFi) craze that quickly gained over $500 million of investments, could fail and lose all of its money due to not being properly coded. Lo and behold, the YAM protocol has indeed completely failed, with the price of YAM crashing from over $100 to zero within 35 minutes.
Notably, YAM wasn’t hacked, which was a possibility if it would have stuck around a bit longer, instead the YAM protocol failed so catastrophically that it died and instantly became worthless.
Apparently it came down to one line of code, a critical line of code that regulated YAM printing. It wasn’t coded right, and it printed ridiculous amounts of YAM and destroyed the market.
That being said, if that one line of code didn’t fail, certainly another line of code would have failed. When it comes down to it, YAM was poorly built, and there were many ways it could have failed.
It is unclear how much money was lost, but it looks to be tens of millions of dollars, and possibly in excess of $100 million.
Zooming out, the real story here is how reckless the DeFi craze has gotten. It’s just like the initial coin offering (ICO) boom now, and indeed the YAM saga played out just like numerous failed ICO cryptos in the past.
Literally, there’s so much DeFi speculation right now that any project can quickly gain tremendous amounts of investments, no matter how poorly built a project is.
In fact, the only thing that will likely come out of the YAM-Pocalypse is that scammers will begin launching as many DeFi projects as possible, in order to capitalize on foolish investors.
If the DeFi craze keeps heading in this direction it will likely end up just like the ICO boom, with government regulators cracking down and destroying the space. Only time will tell, but with the failure of YAM there is no doubt that the Securities and Exchange Commission (SEC) is already watching DeFi very closely and perhaps readying an attack.