PolyYeld Finance xYeld Exploit

Notice: This page is a freshly imported case study from the original repository. The original content was in a different format, and may not have relevant information for all sections. Please help restructure the content by moving information from the 'About' section to other sections, and add any missing information or sources you can find. If you are new here, please read General Tutorial on Wikis or Anatomy of a Case Study for help getting started.

Notice: This page contains sources which are not attributed to any text. The unattributed sources follow the initial description. Please assist by visiting each source, reviewing the content, and placing that reference next to any text it can be used to support. Feel free to add any information that you come across which isn't present already. Sources which don't contain any relevant information can be removed. Broken links can be replaced with versions from the Internet Archive. See General Tutorial on Wikis, Anatomy of a Case Study, and/or Citing Your Sources Guide for additional information. Thanks for your help!

PolyYeld Finance

PolyYeld Finance allowed participation in staking and liquidity pools, with funds in a smart contract hot wallet. The particular implementation depended on a second smart contract called the MasterChef, which was not designed to handle deflationary tokens. As a result, the pool was exploited and a massive amount of the native token were minted. The exploiter was able to get away quickly with the proceeds.

The PolyYeld project ran a compensation program which was live for only 72 hours before relaunching a new project. The plan was to mint up to $250k in new tokens to make things right. There are several comments from participants who missed the deadline and did not get compensated.

This is a global/international case not involving a specific country.

About PolyYeld Finance

"@PolyYeldFinance [is a] Next Generation Yield Farming Protocol on @0xpolygon" "PolyYeld Finance is a next-generation yield farming protocol on the Polygon network with lots of unique and creative features that enable you to earn a passive income."

"YELD V2 token holders can enjoy the benefits of being an investor by earning stable coins such as ETH, WMATIC, USDC, DAI and many more by staking their $YELD V2 tokens."

"We are trying to create a protocol like Yearn, but with a reduced token supply and high value for Polygon Network users, LP providers and stakers. There will only be 86,000 YELD V2 tokens which will be minted throughout the course of 3-4 months."

"A certain % deposit fee will be charged when users enter staking on PolyYeld, but unlike other yield farms, we do not plan to use the deposit fee to buy back and burn. It is a waste of money. Instead, we will redistribute the deposit fee to YELD V2 holders to encourage holding."

"This is a yield farm launched on Polygon or Matic Chain and they have a team of 5 people. There is approx 45M in TVL and multiple ways to earn some sweet yield from people who want to earn some passive income through Defi. This project has done well so far considering most yield farms either die off in the first week or rug or disappear because of shady teams."

"PolyCat/Panther fork. No vaults, emission rate is only 0.015 token per block (PolyCat is 1 as a reference point). 2% referral rate (maximum is 5%). Maximum token supply is 62100. Deposit fees up to 100% are possible. Ownership of Masterchef is not a timelock. No harvest lockup. Has commented-out vault code in MC, suggesting possible vault introduction in a redeployed MC. Check MC ends in 01B4. Dev has another set of YELD token and Masterchef contracts, and a pair of unverified contracts. A possible vault feature in the website and very odd responses from the dev suggests that there may be more than meets the eye. Please exercise caution."

"After the successful launch of PolyYeld on Polygon, the PolyYeld ecosystem will be introducing an additional simultaneous layer of farming, xYELD."

"xYELD is an innovative token in the PolyYeld ecosystem with it’s own unique features that will be launched while PolyYeld is still in it’s minting phase. PolyYelds approach to layered farming is not the typical layered farming approach you see around many other projects where the first gen token finishes it’s minting phase and is carried onto the next layer. Instead, the second layer minting phase will end before the first layer, and will be taken back to the first layer. You can call this reverse layer farming."

"Introducing another layer of farming will not only benefit Yeld token holders, but will also attract new investors which missed out on our first successful launch. Since the launch of PolyYeld, we have built a strong community and have gained trust from our investors. We would love to give back to them by delivering the best DeFi protocol on Polygon with our unique, and innovative ideas."

"Most of the yield farms use a trusted contract called a MasterChef, which is used even by PancakeSwap themselves to distribute rewards. MasterChef was never designed for special tokens. It was designed specifically to receive rewards for LP tokens."

"As you may have heard, PolyYeld suffered an exploit." "@PolyYeldFinance was exploited to mint 4,995 billion YELD and later swap 4% of them to ~123 ETH (with roughly $250K)."

"The exploit limited itself to the native token only (YELD) and was exploited due to adding the xYeld token to Yeld masterchef which unfortunately could not support the token as it had transfer taxes." "The hack was due to the lack of deflationary token support in MasterChef. Specifically, a deflationary token xYELD charges a fee on its transfers. With repeated deposits and withdraws, the xYELD balance of the pool becomes 1 WEI, which sets the stage for actual exploitation."

"[T]he calculation of YELD reward relies on the xYELD balance of the pool, which is currently 1 WEI. Such a low pool balance is considered as the total staked amount, hence dramatically inflating the reward amount to the attacker (with the 4,995 billion YELD)."

"The attacker swaps 4% of minted YELD to 123 ETH via @QuickswapDEX, @SushiSwap, and @ape_swap." "The gain of 123 ETH (with roughly $250K) is immediately transferred to Ethereum via Polygon Ether Bridge @0xPolygon and largely deposited to @TornadoCash."

"We sincerely apologize for this incident and would like to compensate everyone affected by the exploit with our rebuilt project." "The CEO of PolyYeld has decided to make a rebuild of PolyYeld and give our loyal investors a fair compensation to make things right."

"From today, 6th August 13:00 UTC we will release the compensation form where xyeld stakers on L1 and Yeld holders are able to submit their claim. The reasoning behind xYeld being compensated on L1 is due to the exploiter draining all the xYeld tokens from the contract not allowing users to unstake. xYeld holders on L2 will not be compensated due to it not being attacked directly by the exploit. We assured that L2 was unaffected."

"[W]e have created a form specifically for compensation. If we find any invalid entries, you will be disqualified from the compensation programme. Please note, we will not be taking in any submissions after August 9th 2021 13:00 UTC, 72 hours from now."

"A snapshot of the price right before the exploiter will be the calculated price for the compensation. We are aware that trading has still been going on for $YELD after the exploit; any $YELD tokens purchased after the exploit are not eligible for compensation."

"A total sum of $250k (what was stolen) in the new token will be airdropped to those who are eligible for the compensation over the estimated course of 2–4 weeks, all depending on the farm longevity. The airdrop will be distributed in batches rather than all at once to prevent a huge sell-off, which batch you get your compensation in depends on how early you fill out the form so once again please fill the form at your earliest convenience."

"We are happy to announce that the PolyYeld V2 audit is completed!" "They have been audited by Paladin and redeployed to new contracts." The contract now "[c]orrectly accounts for transfer taxes on any token pool. This means that their V1 exploit has been patched."

"The moment you have all been waiting for! PolyYeld V2 website is now live." "Thank you everyone for your patience and faith in the team. We are here to stay, stronger than before."

This is a global/international case not involving a specific country.

The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.

Include:

• Known history of when and how the service was started.
• What problems does the company or service claim to solve?
• What marketing materials were used by the firm or business?
• Audits performed, and excerpts that may have been included.
• Business registration documents shown (fake or legitimate).
• How were people recruited to participate?
• Public warnings and announcements prior to the event.

Don't Include:

• Any wording which directly states or implies that the business is/was illegitimate, or that a vulnerability existed.
• Anything that wasn't reasonably knowable at the time of the event.

There could be more than one section here. If the same platform is involved with multiple incidents, then it can be linked to a main article page.

The Reality

This sections is included if a case involved deception or information that was unknown at the time. Examples include:

• When the service was actually started (if different than the "official story").
• Who actually ran a service and their own personal history.
• How the service was structured behind the scenes. (For example, there was no "trading bot".)
• Details of what audits reported and how vulnerabilities were missed during auditing.

What Happened

The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.

Key Event Timeline - PolyYeld Finance xYeld Exploit

Date	Event	Description
July 27th, 2021	Main Event	Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.

Technical Details

This section includes specific detailed technical analysis of any security breaches which happened. What specific software vulnerabilities contributed to the problem and how were they exploited?

Total Amount Lost

The total amount lost has been estimated at $250,000 USD.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

Immediate Reactions

How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?

Ultimate Outcome

What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?

Total Amount Recovered

There do not appear to have been any funds recovered in this case.

What funds were recovered? What funds were reimbursed for those affected users?

Ongoing Developments

What parts of this case are still remaining to be concluded?

Individual Prevention Policies

No specific policies for individual prevention have yet been identified in this case.

For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.

Platform Prevention Policies

Policies for platforms to take to prevent this situation have not yet been selected in this case.

For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.

Regulatory Prevention Policies

No specific regulatory policies have yet been identified in this case.

For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.