New $5M exit scam fears as DeFi grows on Base with 1inch Network launch

1inch Network has announced its expansion to Base, a Layer-2 Ethereum scaling solution incubated by renowned crypto exchange Coinbase.

This strategic move aims to offer 1inch users access to deeper liquidity, lower transaction costs, and higher speeds, further enriching their trading experience.

However, the news comes as a warning regarding an impending exit scam by Magnate Finance was issued earlier today by user ZachXBT on X.

Magnate Finance exit scam fears.

Magnate Finance, with a Total Value Locked (TVL) of over $6.4 million on Base, is suspected to be linked to a previous exit scam involving Solfire that resulted in a $4.8 million rug pull in January 2022. The deployer’s address for Magnate Finance has been identified as the same as that linked to the Solfire scam, as reported by CertiK Alert.

Certik reported that within an hour of ZachXBT’s tweet, Magnate Finance seemingly vanished, removing its website and social media accounts. This raised further suspicions about the project’s legitimacy.

However, the plot thickened when it was revealed that the deployer account had manipulated the price oracle provider. This action enabled them to drain $5.3 million of liquidity by providing fake collateral, according to CertiK.

Further, CertiK reported that before this alleged exit scam, the project had peaked at a TVL of $6.4 million. Furthermore, $2 million USDbC, 946 ETH (approx $1.56 million), $1.3 million DAI, and 247 WETH (approx $408k) were drained from the project, further exacerbating the situation.

1inch opens liquidity for Base.

1inch Network reported on Aug. 24 that the 1inch Aggregation Protocol and the 1inch Limit Order Protocol have been deployed on Base to the delight of its co-founder, Sergej Kunz.

He expressed confidence in Base’s potential, particularly with the backing of a dominant player like Coinbase, and lauded the shared philosophy of broadening blockchain adoption to the subsequent billion users.

Built as an Ethereum Layer-2 scaling solution, Base promises enhanced security, stability, and scalability for powering decentralized applications (dApps) and an Ethereum Virtual Machine (EVM) environment but at a reduced cost. However, as the Magnate Finance situation indicates, DeFi is still susceptible to malicious human actions.

Per the 1inch Network announcement, the projects deployed on Base stand to benefit from Coinbase product integrations and straightforward fiat onramps, potentially enriching the Coinbase ecosystem of users.

Since its public launch on Aug. 9, Base has seen impressive adoption, with daily active users surpassing the 100,000 mark. Furthermore, daily transactions have increased closer to those on popular Optimistic Rollup scaling solutions such as Optimism and Arbitrum.

Riding on the Base expansion, 1inch users can access another Layer-2 solution with lower transaction fees, higher speeds, and extra liquidity.

The list of protocols immediately accessible via 1inch on Base is comprehensive, including Uniswap v3, Balancer v2, SushiSwap v3, and others. Users can visit the 1inch Help Center for detailed guides on how to use 1inch on different networks.

Rise in Base adoption.

Notably, the surge in Base’s transactions aligns with the recent highlight from Coinbase CEO Brian Armstrong. In an Aug. 23 post on X, formerly known as Twitter, Armstrong pinpointed Friend Tech, a decentralized social application, as a critical driver of Base’s growth and adoption.

According to Armstrong, the development and hype surrounding the Friend Tech platform could have contributed to Base’s substantial volume of transactions.

Less than two weeks from its launch, Friend Tech has recorded a total volume of over 43,064 ETH (equivalent to over $70 million) through 1.8 million transactions, according to Dune Analytics data.

Base also received notoriety following the launch and alleged pug pull of the BALD token last month. Further, other DeFi platforms have had issues on Base, including RocketSwap and SwirlLend, which experienced a hack and a rug pull, respectively, totaling over $1 million.

It has been a rocky start for DeFi on Base. However, the introduction of key DeFi platforms such as 1inch hopes to legitimacy and security of the network going forward.

The 1inch token is currently trading up around 3% at $0.24, down 20% over the past 30 days.