The DeFi world developed strongly in 2020 and it exploded in 2021. DeFi’s popularity continues to grow and every week new projects, platforms and protocols are added. However, this popularity is also comes with a slightly less fun fact, that’s DeFi protocols are regularly targeted by hackers. Flash loans, exchange hacks (DEX), wallet hacks, token minting and rug pulls are unfortunately regularly in the news. That’s not fun for anyone, nor for the investors and also not for the developers and the teams of these DeFi projects. Billions of dollars change hands involuntarily every year in this way. There is not really a solution for this yet, except that before a possible hack an audition can take place and after the hack any gaps are closed.
In this blog, I’m going to talk about the Lossless Protocol and its associated LSS token. I’m going to explain to you what the Lossless Protocol is exactly and how it works. We are also going to investigate the team behind this project and take a look at the price of the LSS token. If you want to know where to buy LSS, you’ve come to the right place.
Please note: please note that the text below about ‘Lossless Protocol (LSS)’ as well as the explanation thereof should in no way be construed as advice. The choice for whether and in what way you want to trade (crypto) and which choices you make in terms of investment is up to you and you alone. We are not financial advisors.
Here you can first watch a video showing how the Lossless Protocol works.
- 1 What is the problem that causes DeFi protocols to be hacked so often?
- 2 What is Lossless Protocol?
- 3 How does Lossless work?
- 4 Who is on the team behind Lossless?
- 5 What is the LSS token?
- 6 What is the price of the LSS token?
- 7 Where can you buy the LSS token?
- 8 What is the best way to store the LSS token?
- 9 Conclusion
What is the problem that causes DeFi protocols to be hacked so often?
In 2020, there were no fewer than 122 major hacks in the DeFi world and $3.8 billion was stolen. By November 2021, the TVL (Total Value Locked) in DeFi had already passed $274 billion. And we still hear of flash loan attacks, rug pulls, token minting and of wallets and exchanges being hacked. Cream Finance was hacked no less than three times in 2021. For $37 million in February, for $29 million in August and a whopping $13 million in October. A wonder in itself that they are still there! All three times it was a flash loan attack, the most popular way to involuntarily rid DeFi protocols of their crypto in 2020 and 2021.
A flash loan attack is a way to borrow money that must be paid back in the same block time. If no transaction takes place during this time, the entire loan will expire as if nothing happened.
Black hatters vs white hatters
It is no wonder, because it is an anonymous event and there are hardly any preventive means that can be used. The more money involved in something, the less fluff people come to it. DeFi is certainly no exception.
What is interesting about DeFi, however, is that the black hatters (the rogue figures or hackers) who carry out the attacks are regularly transformed into white hatters. This is an interesting phenomenon, because a hacked protocol can’t actually go to the police. Instead, they try to contact the hackers as far as possible. If successful, they will give a generous reward in exchange for the return of the money and if they show how the hack works. In other words, the hackers reveal their entrance or the way that allowed the hack to be set up. This sometimes works, but certainly not always.
Another way to prevent a protocol from being hacked is through auditions. During these auditions, a protocol or network is screened for any holes or leaks where a hack could take place. This sounds pretty good, but it’s not really waterproof either. For example, the PAID Network was hacked after several auditions were conducted. This used a mint hack, where $100 million worth of tokens were minted and then sold quickly. The price of the PAID token immediately fell by 80%.
Tether takes another approach.Their USDT tokens can be frozen by a formula in the smart contracts . If USDT is stolen, it is first determined whether they have really been stolen. If this is the case, the addresses to which the stolen tokens were sent will be blacklisted. These tokens can then no longer be used. However, this is a centralized way to solve the problem. And that in a decentralized environment. So that’s not very good either.
What is Lossless Protocol?
The Lossless Protocol aims to limit crypto hacks and is the first protocol to do so. This should lead to a safer and more trusted DeFi environment. They do this with a combination of dentalized and centralized options. Their solution, created by a team of experienced engineers, DeFi experts, financial professionals and white hatters, looks like this;
a new protocol which would enable safe and reliable DeFi investments, as well as support the development of blockchain technologies.
In Dutch; “a new protocol that enables secure and reliable investments in DeFi and supports the development of blockchain technologies.”
Lossless wants to stop and undo or revert hacks if they do happen. They have come up with a unique structure to solve this hacking problem. In this way the game theory mechanisms and a decentralized decision-making body are brought together. These two will now look at and solve a hack together in a neutral way.
How does Lossless work?
Lossless uses the idea of Tether, because a suspicious transaction can be frozen. Anyone can do this. After that, three independent parties decide on the ultimate outcome of which action to take.This is a code that token creators can enter in their tokens. Now token creators have a chance to reduce fraudulent transactions by adding parameters that can identify fraud to their tokens. There are specific bots that can spot hacks and continuously scan transactions, looking for unusual activity, and then report it.
- On-chain events.
- Unusual token activity. Large trades, withdrawing liquidity, and so on.
- Third Party Messages.
How hacks are spotted can be seen in the following image.
If such a hack is observed, anyone who stakes LSS with at least $5,000 worth of LSS tokens can freeze the transaction for 24-48 hours. The next step is for the ‘decentralized Lossless decision-making body’ to come into action. This consists of onion;
- Token creators.
- Lossless committee. For example, investors with a large amount of LSS tokens and audition firms.
- Lossless firm.
This body is now reviewing the frozen transaction and giving a reliable and impartial decision as to whether or not it is a hack.
If it is a hack, further action will be taken. The fraudster’s address can be frozen for up to 14 days. Following is a proposal from the decision-making body to permanently freeze the receiving address and undo the transaction.
However, if it is not a hack, the discontinued tokens will be taken from the person who reported the hack and the address will be released again. This may be an expensive joke, but then again, the reward for hacking is easily worth a lot more than $5,000.
Setting up the hack bots
The bots that can find these hacks can be set up by anyone via the Lossless API. They are open source, so anyone can contribute to them. For token creators and hack spotters there is a ‘winner takes all‘ format, where whoever spots the hack gets the reward. This encourages the community to participate actively in order to further develop and improve the model.
What is important to note here is that the first or fastest finder of the hack thus receives a fixed reward, a percentage of the hack that is 7%. This can be a high reward considering how high DeFi hacks sometimes get. What is special about this project is that no costs have to be incurred in advance. Everyone can join. However, you must stake a minimum of $5,000 worth of LSS tokens.Whoever makes the fastest or best bot will also get the most rewards. It is assumed that at some point there will be competition to be the first to find a hack. In this way, Lossless is the first protocol that rewards white hackers by making DeFi more secure for everyone. The $5,000 stake for the strike then seems like a small and justified investment for hackers for hacks.
Who is on the team behind Lossless?
The team is from Lithuania and looks solid and varied. Let me briefly review the key team members.
- Vygandas Masilionis — Co-Founder and CEO. He has extensive experience in various other projects, from engineering to product development and marketing.
- Domantas Pelaitis — Product lead. Software engineer and has worked at Syntropy , among others .
- Dominykas van Otterlo — Chief Business Development Officer. Working in blockchain since 2018 and studied in Groningen. Could it be his last name?
- Monika Sviderskė — CMO. Marketing lead. Was also active for the Brokoli Network .
On their website 9 people are designated in the team, on their LinkedIn page there are twelve. The team is young and energetic and seems to be up to the challenges of their project.
What is the LSS token?
The LSS token is an ERC20 token and it is a management token. The maximum number of LSS is 100 million of which there are 35,822,671.94 LSS in circulation, in mid-December 2021. The market cap is $23,997,908 or 24%.
White hatters wishing to report a hack will first have to stake $5,000 worth of LSS tokens. The rewards for finding a hack are paid in LSS.
The token distribution looks good, 15% will go to the team and all tokens will be paid out over a 24 month period. This is a good sign and shows that the team is serious about the project and not planning a back pull.
The image below shows the distribution of the LSS token.
The issuance of the LSS token will take place in the following manner.
What is the price of the LSS token?
If you want to invest in the LSS token, a good start is to know its price. If you are already going to trade, you also want to make a profit. You can make a technical analysis to see what the best buy or sell moment is.
The LSS token was listed on CoinMarketCap on June 3, 2021 at a price of $0.0, before pushing to $0.6943 the same day. Almost immediately after that, an early ATH was reached on June 7 with a price of $0.7507. After that, the price also fell again and until 2 October the price was around $0.24. Then the price regained a more positive momentum, resulting in a new ATH on October 20, 2021 of $2,4342. After that, the price has gradually fallen and at the time of writing, mid-December 2021, the price is $0.6678.
At CoinMarketCap , this token is just inside the top 800 in place 799. This coin has a good prospect in my opinion, a relatively small market cap and it’s a good idea. I think he could have a good price development. As I am not a financial advisor, it is good to do your own research if you want to invest in this coin.
Where can you buy the LSS token?
The LSS token is not yet for sale on Bitvavo and Binance . A few leading CEXs do offer this coin, such as Gate.io and KuCoin . There is also a liquidity pool on the Uniswap DEX where you can find an LSS pair.
What is the best way to store the LSS token?
You have several options to save this token. The safest way is to store them on a hard wallet , also known as a cold wallet . With a hard wallet, such as the Ledger X or S and the Trezor, you are protected against internet hacks.
You can of course leave your LSS token on the exchange where you bought the token. However, now you do not have access to your private keys. The private keys of an exchange remain in the hands of the exchange itself. The danger of a hacked exchange is always there and then you have a chance that you will lose your coins. These wallets on an exchange are also called hot wallets .
As a third option, you can also use an online wallet such as MetaMask or Trust wallet. Here is also another chance of an internet hack, but it is theoretically smaller than a hack on a stock exchange.
The Lossless Protocol is the first platform that seems to have a solution to prevent hacks in the DeFi world. With a simple code that a creator can program into a token, there is now a free way to get the tokens back anyway. In this way LSS Protocol makes the DeFi world more reliable and secure.
They have a unique system that consists of two parts, with which a suspicious transaction can first be frozen. After this, further investigation will reveal in a neutral and unbiased manner whether it is indeed a hack. Anyone can join the search for these hacks, through open source bots, which can be modified. Now if a white hatter strikes $5,000 worth of LSS tokens, he can join the scavenger hunt. The first white hatter to find a hack gets a reward. In DeFi this can be very lucrative. LSS Protocol therefore expects that a competition will take place to spot hacks.
Lossless Protocol seems to be well put together, and I wouldn’t be surprised if this project starts to gain a lot of popularity. The LSS token has only been on the market since June 2021, so there is still quite a bit of growth in it. The price of the LSS token will, in my opinion, still undergo a positive development. I am not a financial advisor, so if you want to invest in the LSS token, do your own research first.
If you have any questions about the Lossless Protocol, let us know on our Crypto Buying Facebook group . You can also follow us on Twitter . See you there!
Thanh Lanh Tran(1989) is Chief Editor from BitcoinUSD.com