Beware of the “soft carpet” – a growing threat in decentralized finance

The decentralized financial ecosystem has been plagued by a large number of known scams and exploits for some time, others appear as so-called “soft carpets”.

Anyone who has been using DeFi for a long time is familiar with the term “traction mats”. This usually refers to insiders or developers abandoning the project, removing the liquidity from pools or vaults on decentralized exchanges and disappearing with the funds.

A related disadvantage of the emerging financial landscape is the “soft carpet” where creators simply sell their tokens and leave the company instead of taking control of their assets.

In some cases, a soft carpet is more insidious as developers try to build trust and a false sense of security while fabricating token dumping. If done skillfully enough, the user may not even know they’ve lost out.

There have been several incidents in the DeFi scene over the past week of alleged soft carpet exit scams.

The team at Polywhale, a polygon-based productivity farming project, announced in a Reddit post on June 20 that it will be shutting down the platform. Two days later, token holders discovered that the project’s treasury wallet was empty.

As reported by Cointelegraph, the founders of Polywhale Finance allegedly pulled a soft carpet by selling their tokens during the recent crypto market price crash. The project’s native token, KRILL, has fallen from a high of $ 7 earlier this month to $ 0.17.

Connected: Pulling the carpet: DeFi investment hype is driving crypto exit fraud on the rise

Defiant reported on another alleged soft carpet regarding Swipe, the company that developed Binance Smart Chain’s third largest protocol, Venus.

On June 22nd, the founding team of the BSC-based currency market and stablecoin protocol announced that they would be bailed out of the project. Uniswap community member @MonetSupply accused the team of a soft carpet on Tuesday.

looks like great @binance Project @VenusProtokollCore group of (@Swipe) put on a soft carpet

for lending protocols, solid governance isn’t everything, it’s the only one https://t.co/MDVMrw7I4y

– monetsupply.eth (@MonetSupply) June 22, 2021

However, members of the new Venus community denied the allegations, claiming it was just a rumor, and the Swipe team gave up all of their tokens.

The crash didn’t stop the Venus-native XVS token from losing 40% since the same time last week when it was trading near $ 34. According to CoinGecko, XVS is down 87% from its all-time high of $ 147 on the day 10, redeemed for $ 19.28 at the time of writing.