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OP Crypto Suffers Steep Losses After Theft of 20M Tokens

Investor Place · 06/09/2022 10:47

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The Optimism (OP-USD) project is drawing a lot of attention since it began airdropping its new governance token. However, little of this press is very good; the drop has been full of mishaps. This slapstick continues today in the form of a miscommunication-turned-theft. Indeed, somebody is making off with millions of the OP crypto tokens after a simple wallet address typo.

Optimism is a solid project with plenty of potential. It is a layer-2 network underlying Ethereum (ETHUSD). Using Optimism, one can subvert the high gas fees and slow transaction costs associated with the Ethereum network. It’s a solid home base for developers who want high throughput on their dApps while still being Ethereum-adjacent.

At the beginning of June, Optimism began to attract investor attention as it brought a new product to the table with OP crypto. OP is the new governance token of the network. With the growing popularity of decentralized autonomous organizations (DAOs), more projects are starting to implement on-chain governance as an appealing feature to new investors. By holding governance tokens, crypto investors can do more than just invest. Rather, they can put their investment to use as voting power.

Unfortunately for Optimism developers, though, this governance token’s airdrop has been riddled with issues. From the very start, the OP crypto has been suffering. The day of the airdrop was met with a massive bottlenecking of transactions, which caused transactions to take very lengthy periods of time and high gas fees to execute. The irony of a layer-2 network suffering the same issues as its layer-1 is not lost on investors. OP-USD saw an immediate 70% loss the day of the drop.

OP Crypto Tumbles After Address Error Leads to Theft

The OP crypto continues its sulking today after yet another issue, this one more preventable than the last. It seems that a market maker’s mistake allowed a thief to deal further blows to the token’s price.

A blog post from Optimism describes the nature of the theft. Essentially, the 20 million tokens were meant to be sent by Optimism developers to a market maker called Wintermute. However, Wintermute provided the wrong wallet address. As a result, Optimism the funds were sent to a wallet that had not yet been deployed on the Optimism network.

A bad actor was able to beat Wintermute to the punch, deploying the address and accessing the tokens. This perpetrator is already sending one million of the tokens to a mixing service, likely to sell it. Another 19 million tokens, meanwhile, remain in the wallet. The funds’ total value comes in at about $15 million.

As long as the thief retains control of the funds, they will be able to vote on all Optimism governance proposals with them. Obviously, this gives the perpetrator significant on-chain power. As for correcting the error, Optimism is leaving the decision up to the community. Meanwhile, Wintermute has dedicated itself to buying up OP crypto whenever the thief sells it until it recoups the funds.

In response to the news, OP crypto prices are taking another dive. This morning, the token is trading down by 17%.

On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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