There was a story of a DeFi yield farmer who lost $140, 000 in UNI tokens without him knowing that he is participating in a fraudulent yield farming project that was revealed by a researcher at a crypto keyless wallet recently.
It was Jhon Doe who lost his $140,000 worth of Uniswap's UNI tokens that was yield on a farming scam. The project was called UniCats, that John Doe the user of Ethereum lost his DeFi tokens, told by the crypto researcher at ZenGo.
UNI was launched in mid September, a Uniswap's governance token to promote many users to its platform and claim the Ethereum based tokens. Uniswap's official announcement was to release 1 billion tokens in the market eventually in the next four years.
Yield farming has been surging popularity due to the high returns of the users able to accumulate by locking up their crypto assets, in the recent months. Some users have fallen into a victim in many scams and bad actors in the industry who are looking funds to steal, despite that there are massive benefits provided by many yielding farm projects to the users.
Yield farming craze has brought many users to expect in making high amout of returns just like Yearn.Finance's YFI tokens that recently surged up an all-time high over $40,000 due to the DeFi craze.
Jhon Doe was seeking to have high returns on the yield farming hype, that he allocated some of his UNI tokens in a DeFi scheme called Unicats, he got scammed explained by a series tweets of Alex Manuskin. UniCats allow users to farm its MEOW tokens, then they can withdraw their tokens.
John Doe let the decentralized application(Dapp) to spend his UNI in an unlimited way and approving all the transactions believing that all the farming Dapps have done it in the past, so he said “Why not?” explained by Manuskin. As he continued to farm the MEOW token, he has made considerable amount of interest then decided to take out his UNI tokens together with the profits but it was too late.
When he approved the contract to used his unlimited permission, the contract enables to take the users token anytime even when they already withrawn their tokens in the yield farming scheme said Manuskin.
“UniCat is a cunning bastard. To cover their tracks, for each new victim, it creates a new smart contract and passes the ownership of the farm to the new contract.”
John Doe's story was unfortunately the tale of cautionary bad and ugly face of yield farming industry in terms of financial losses. It was like a horror experience losing big money on a DeFi farming schemes that turned out to be a scam.
What is yield farming?
Yield farming is a way to make more crypto from your cryptos. It involves lending your funds to others through the used of magic computers called smart contract, in return you will receive some fees in a form of crypto with your contributions. As a yield farmers you have to use very complicated strategies, lending cryptos to different markets to maximize returns. Yield farming is done in Decentralized Finance (DeFi), where all farmers are competing to yield the best crops.
Decentralized Finance is an innovation in blockchain space, which is permissionless that means anyone can participate with just Internet connection and a supported wallets. They don't need to trust any custodians or middlemen. In short they are trustless. Yield farming was a concept to earn cryptocurrency holding using permissionless liquidity protocols. Allowing anyone to earn passive income by using decentralized ecosystem of “money legos” built on Ethereum blockchain. “Why putting your assets on idle? When you can make them work” that's how yield farming is.
Yield farming is done through ERC-20 tokens on Ethereum and the rewards are also in the ERC-20 tokens form. Yield farmers will usually move their funds to different protocols in searching for high yields. DeFi platforms will also provides other economic incentives to attract more capitals in their platform as a result.