So, there you have it, another day, another DeFi platform goes kaput. This time it’s Loopscale, previously known as Bridgesplit – ring any bells? The new lending app, incubated by Solana Labs and Coinbase Ventures to disrupt the future of lending. All of this they are accomplishing with their new order book model. Now, they're $5.8 million lighter, and all I can say is: I told you so. (Alright, maybe not you individually, but someone ought to have paid attention!)

Audited? What a Joke, Seriously!

Let's be real. Loopscale got OShield audited. They were deep into a Sec3 audit! And still got exploited. It’s akin to receiving a clean bill of health and then getting clipped by a bus on the way home. Never mind that in real life the doctor said you were fit to cross, you’re still dead as long as you got run over. The DeFi space often seems to think audits are the magic bullet, but they aren’t. Clearly these audits that are as effective as a screen door on a submarine aren’t enough. They’re more like expensive window dressing for a fundamentally broken system. How many additional millions need to disappear before we finally acknowledge that the emperor has no clothes?

  • The Problem: Audits are snapshots in time. Code is constantly evolving.
  • The Reality: Hackers are persistent. They only need to find one vulnerability.
  • The Conclusion: Audits are a false sense of security.

Wen Moon? More Like Wen Rug!

So Loopscale’s entire EUR pitch was “predictable loan terms” and “lower interest rate volatility.” Sounds responsible, right? The sort of thing your grandma could even comprehend! Here's the dirty little secret of DeFi: it's all smoke and mirrors. You can dress it up with all sorts of technical jargon like order book, but at its core it’s the same rigged casino. Everyone running after the same unsustainable APYs, trying to get regularly, and in the end, someone’s stuck holding the bag. This $5.8 million loss is about 12% of their TVL. Every dollar spent represents the money that could go to real people.

Remember the "wen moon" crowd? You know the ones, the ones marketing deals that offer impossible returns, the ones who always happen to leave out all the risks involved? They’re parties to this, whether they know it or not. They're the ones creating the buzz and luring in naive rubes—um, sorry, investors. This is the perfect recipe for a rug pull or in this case, a flashy “exploit.”

And then there’s the irony of Loopscale’s entire rebrand. Then they rebranded from Bridgesplit (already a sus name) to Loopscale, ushering in the DeFi utopia. That’s as effective as a used car salesman slapping a new coat of paint over a lemon. Same old issues, different paint job. This is not a rebranding of the same old issues. At the end of the day, the car eventually breaks down.

DeFi's Dirty Little Secret Exposed

DeFi at its heart is a Ponzi scheme. Hear me out. Money in from new investors used to payout early investors. Wash, rinse, repeat until the music stops and the entire house of cards unravels. Despite its public relations claims, DeFi is not particularly innovative or decentralized. At its heart, just like its namesake, it looks an awful lot like any old Ponzi scheme. Don't be fooled. The fundamentals are the same.

Just view the Bybit $1.46B hack, the KiloEx $7M loss, the Infini $49M breach. These aren't isolated incidents. They're symptoms of a systemic problem. An issue of out of control GME, bad opsec, and a big bucket of hopium. The issue isn’t with one exploit, but the whole DeFi space.

The only victims in this situation are the average people who thought Loopscale was worthy of their hard-earned cash. Those who were duped by the glitzy marketing campaign bought into the fantasy of huge returns. Instead, they are all too often, much like consumers on payday loans, left with emptier wallets and a bad taste in their mouths. What would you guess their mood is today? Scared? Angry? Betrayed? Rightfully so.

Here’s the harsh reality — it’s time to stop pretending that DeFi is the future of finance. It's a casino where the house always wins, and the players are just pawns in a game they don't understand. So then, is DeFi simply a pyramid scheme in more steps and far more convoluted lingo? I'll let you be the judge. I don’t think we need to pretend to not know the answer.