Although decentralized finance (DeFi) has been touted as the future of traditional finance, the road to widespread adoption has been laced with a lot of challenges. Amid all the supposed benefits of the sector, such as the elimination of middlemen, lower fees, and global access to financial services, the DeFi space has its shortcomings. For one, the crypto space, and more recently, the booming DeFi niche has become a hotspot for malicious actors.
According to data from crypto analytics firm Messari published by CoinMarketCap, over $284 million has been lost in DeFi hacks since 2019. Out of these hacks, flash loan attacks, rug pulls, flaws in smart contracts and price manipulations were the most common vulnerabilities. Messari claims that the average amount lost to such incidents is $11.9 million. Even more saddening is the fact that such attacks are not peculiar to only newer projects. Some of the biggest names in the DeFi space, including Balancer, SushiSwap, Yearn Finance, Maker, and PancakeBunny, have all been victims of these attacks.
In the case of PancakeBunny, the attacker(s) reportedly stole a whopping $200 million in a flash loan attack.
Such rampant incidents of hacks and the inability to recover stolen funds in most cases make it practically impossible to tag DeFi as a sound investment vehicle. Moreover, there is also the steep knowledge barrier that new users will have to overcome before they can participate in the industry. Bearing these in mind, OrionSwap is a new DeFi platform that is trying to change the narrative. The automated market maker (AMM) recently went live on the Binance Smart Chain (BSC).
The OrionSwap Solution
According to the OrionSwap team, its ultimate goal is to “help make DeFi a legitimate marketplace for everyday investors.” The project has taken quite a unique approach towards solving some of the current inefficiencies of the DeFi space.
Firstly, OrionSwap has removed all flashloan logic from its protocol. While this may appear controversial, the team claims that the supposed benefits of the move far outweigh its downsides. While this does not solve the flash loan problem on a larger scale, OrionSwap hopes that by taking the lead, other AMMs will follow.
The DeFi project explained in a recent blog post:
“At the end of the day, none of these attacks would have been nearly as severe if there were not millions of easily accessible funds available. Ultimately, we decided to remove the code until we can find better ways to support healthy market mechanics and use cases such as arbitrage and liquidations.”
Apart from disabling support for flashloans, OrionSwap is also looking to provide some clarity through education to members of the crypto community, especially newbies. That being said, the project has kicked off with an article to help users understand pair contracts, fees, and how much they can earn from the AMM. The article covers some other interesting topics such as how APRs/APYs are calculated and what factors that can influence the value, farming, and what to look out for in a DeFi project’s contract.
In closing, considering the tokenomics of OrionSwap, the project appears to have started on the right footing. No liquidity was locked during the launch of its Starfield token. The Orion community has organically grown its liquidity pairs to about $5500. For clarity, Starfields are given as rewards for OrionSwap farms and Galaxy Pools.
Flashloans and rug pulls have grown to become almost daily occurrences in the DeFi space. OrionSwap’s initial response to these issues makes it an interesting project to watch.