Users lose millions in Kannagi Finance rugpulls on zkSync Era protocol

Users lose millions in Kannagi Finance rugpulls on zkSync Era protocol

The Rugpull of Kannagi Finance: A Devastating Blow to the Blockchain Industry

Kannagi Finance, a revenue aggregator protocol built on zkSync Era, recently experienced a rugpull that has left users reeling with losses amounting to $2.13 million. This incident is not only a blow to the affected users but also tarnishes the reputation of the blockchain industry.

The protocol’s official website has allegedly “expired,” and its social media channels, including the official Twitter account, are either inaccessible or deleted. Total value locked (TVL) has drastically plummeted from $2.13 million on Friday to near zero, magnifying the user losses to over $2 million.

The Rise and Fall of Kannagi Finance

Kannagi Finance, known as a revenue aggregator, had its audit on June 6 conducted by SolidProof, an audit agency under Germany-based Make Network. However, despite this audit, the protocol’s smart contract code remained closed-source and unverified, leaving potential vulnerabilities unnoticed. The lack of transparency and openness in the codebase is a significant red flag that should have raised concerns among users and investors.

“The zkSync Era revenue aggregator protocol Kannagi Finance has RugPulled, and its official website has expired. The TVL of Kannagi Finance was $2.13 million yesterday, and the current TVL has almost returned to zero, so the estimated user loss is $2.13m. The Kannagi Finance contract code is not open-source verified,” reported Wu Blockchain earlier on Saturday.

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This incident shines a light on the importance of conducting auditors’ due diligence, not only on the primary protocol but also on the underlying contracts and integrations. In this specific case, SolidProof, acknowledged the rugpull and expressed their commitment to thoroughly investigate the situation. However, they clarified that they did not audit the Vault contracts involved in the reported incident.

“As a registered security provider, our top priority is to assist in resolving this issue promptly and transparently,” the statement from SolidProof read.

Consequences for Users and the Industry

The rugpull of Kannagi Finance has had dire consequences for the users who trusted the platform with their investments. The native token, KANA, has experienced a devastating 99% plunge, virtually wiping out its value.

This incident not only highlights the need for thorough due diligence before engaging with a blockchain project but also shakes the confidence of users and investors in the broader blockchain industry. Trust is integral to the success of any financial system, and rugpulls like the one suffered by Kannagi Finance erode that trust, making it difficult for the industry to grow and attract new participants.

Lessons Learned and the Path Forward

The blockchain industry must learn from incidents like the Kannagi Finance rugpull and take necessary measures to prevent such occurrences in the future. Transparency and open-source code verification are crucial for building trust and ensuring the security of users’ assets.

To avoid such incidents, blockchain projects should adhere to the following best practices:

1. Open-source and verified code: The codebase of blockchain projects should be open-source and audited by reputable agencies. This ensures transparency and enables the community to identify potential vulnerabilities.

2. Independent audits: Engage with third-party auditors to conduct thorough and independent audits of the project’s contracts and integrations. This is a critical step in identifying any vulnerabilities or weaknesses in the system.

3. Community vigilance: Users and investors should remain vigilant and conduct their own due diligence before investing in any blockchain project. Scrutinize the project’s technical aspects, team expertise, and community engagement to assess its credibility and potential risks.

By implementing these measures, the blockchain industry can rebuild trust and create a more robust ecosystem where users and investors can confidently participate.

In conclusion, the rugpull of Kannagi Finance has not only resulted in significant losses for users but has also negatively impacted the reputation of the blockchain industry. This incident serves as a stark reminder of the importance of transparency, open-source code, and thorough audits. By learning from these mistakes and adopting best practices, the industry can build a more secure and trustworthy environment, ultimately paving the way for its long-term success.