The maximum drop reached 89.38%: Understand in one article what fatal mistakes these recently plummeting projects have made!

Author: Vanguard 0

With the rise of Web3 technology, we are witnessing the rapid development of a brand new digital economy. This blockchain-based world promises a more decentralized and transparent online experience, opening up infinite possibilities. However, this emerging field full of potential is not without its challenges.

Recently, several high-profile Web3 projects have experienced unexpected crashes, reflecting not only the volatility of cryptocurrency prices but also the challenges and uncertainties faced by the entire Web3 sector. In this context, we can't help but ask: what are the real reasons behind the collapse of these projects? Is it due to fundamental technical flaws, or is it the result of excessive hype and speculative behavior in the market?

To seek answers, this article will review these crashing projects one by one and delve into the stories behind them, attempting to reveal the complex truths behind this phenomenon. By analyzing these cases, we can better understand the real challenges faced by Web3 projects and how to formulate more robust strategies for future development.

Overview of Recent Web3 Projects That Experienced Crashes: From GROK to QuillSwap

In the previous section, we have seen the challenges and uncertainties in the Web3 field, particularly in projects like YFI. Now, let’s take a closer look at several other prominent cases that further reveal the various facets of Web3 project crashes.

GROK: The Celebrity Effect and Token Speculation Are Not a Long-Term Strategy

First up is the GROK project. On November 4, the xAI team, led by Elon Musk, released its first AI large model product—GROK. Shortly thereafter, hundreds of tokens with the same name appeared in the market, deployed across various Layer 1 and Layer 2 networks.

AegisWeb3: Over 30 counterfeit GROK tokens have been discovered, some linked to Rug Pull scammers.

GROK is essentially a meme token, with its project team designing the logo and website based on the concept of xAI, prominently displaying the token contract. However, investigations by well-known on-chain detective ZachXBT suggest that GROK appears to have been created by scammers, with its official account having been used in at least one scam. Following this news, GROK's price plummeted by about 44% in a short time.

YFI: High-Risk Trading Strategies Lead to Market Turbulence, Token Plunges

Next is the crash of the YFI project. YFI surged nearly 170% in early November, but on November 18, it dropped over 43% within just five hours. Researcher Steven from The Block pointed out that this may have been due to dYdX's insurance fund losing $8 million due to high-profit trading strategies, leading to a massive liquidation of YFI.

Recent price trends of YFI

dYdX founder Antonio also confirmed this, mentioning that the number of YFI open contracts skyrocketed from $800,000 to $67 million. This seems to indicate market manipulation targeting large open contracts on dYdX.

Raft: Technical Vulnerabilities Lead to Hacking and Market Chaos

Next, let’s look at the DeFi protocol Raft. Raft is a DeFi protocol that provides capital-efficient lending. On November 11, its stablecoin R plummeted by 86.59%. This was due to a hacker attacking the Raft protocol, minting a large amount of stablecoin R and selling it, draining the liquidity of the automated market maker.

Raft: Will compensate affected users with 3.96 million DAI due to the attack.

The hacker stole 1,577 ETH during the attack but ultimately destroyed most of the stolen assets. This attack exposed precision calculation issues in Raft's minting of share tokens, which the hacker exploited to carry out the attack.

QuillSwap: Community Questions Project's Integrity, Consensus Collapses

Finally, we have the QuillSwap project. QuillSwap is an automated market maker on the Polygon network. On October 24, the liquidity of its QUILL/WETH trading pair was withdrawn in a single day, causing the token price to plummet by 89.38%. Community members expressed skepticism, suspecting it might be a Rug Pull by the project team, but the team has yet to respond.

Through these cases, we can see the complexity behind the crashes of Web3 projects. From technical vulnerabilities and market manipulation to potential scams, these events reflect various risks in the Web3 field. Next, we will delve into the reasons behind these crashes and their impact on the entire Web3 ecosystem.

Analyzing the Reasons for the Recent Crashes of Web3 Projects: Excessive Hype Combined with Technical Flaws

In analyzing the deeper reasons behind the crashes of these Web3 projects, we can identify several key common issues that are not only evident in the crashes of individual projects but are also prevalent across the entire Web3 industry.

The lack of technical security and stability is a significant issue. For instance, the technical vulnerabilities in the Raft protocol directly led to the price crash of its stablecoin. Such technical flaws not only affect the security of individual projects but can also lead to instability in the entire ecosystem. In the rapid development of Web3, many projects may overlook adequate security testing and risk assessment in their rush to seize market opportunities, making the entire system vulnerable to attacks and manipulation.

Excessive hype and speculative behavior in the market are also important factors contributing to crashes. For example, the Grok project sparked excessive hype and speculation simply due to its association with the well-known figure Elon Musk, ultimately leading to dramatic price fluctuations. This type of investment behavior, based on speculation rather than actual value, increases market instability and bubble risks.

Moreover, market manipulation and centralization risks are also issues that cannot be ignored. In the YFI project, the significant impact of a single trader on the market exposed centralization risks and potential market manipulation. Driven by the decentralized ethos, Web3 projects should pursue decentralized control and a fair market environment, but the reality often sees a few participants controlling substantial resources, thereby affecting the stability of the entire market.

Finally, the lack of community trust and transparency is another factor leading to project crashes. In Web3 projects, community trust and support are crucial. However, once issues such as suspicions of Rug Pull or lack of transparency arise, they can quickly erode community trust, leading to price crashes. For instance, the sudden withdrawal of liquidity in the QuillSwap project raised community concerns about the project's credibility.

In summary, the crashes of Web3 projects reflect multiple internal issues within the industry: technical flaws, excessive hype, market manipulation, and a lack of community trust and transparency. The existence of these problems not only affects the stability of individual projects but also poses challenges to the healthy development of the entire Web3 industry. Therefore, to promote the long-term development of the industry, there needs to be greater emphasis on technical security, enhanced market regulation, increased transparency, and the establishment of sound community governance mechanisms.

The Web3 Industry Still Needs Regulation and Improvement, and Projects' Risk Resistance Capabilities Urgently Need Enhancement

In this article, we have explored the multiple reasons behind the crashes of Web3 projects, covering aspects such as technical flaws, market speculation, centralization risks, and the lack of community trust. These issues not only reveal the vulnerabilities of the current Web3 ecosystem but also point to key areas for future development.

In the face of these challenges, the Web3 community and participants must work together to strengthen technical security and stability, improve project transparency, establish more robust community governance mechanisms, and avoid unnecessary market speculation. Through these efforts, the Web3 field can not only repair existing vulnerabilities but also better respond to future challenges, achieving true decentralization and innovation.

As technology continues to mature and the market environment improves, Web3 has the potential to usher in a new era of the digital economy. However, this requires the collective wisdom and efforts of both internal industry players and external investors; only then can Web3 truly realize its disruptive vision and pave the way for the future digital world.