Ethereum-based asset management protocol Babylon Finance will fully shutter in November after failing to recover from the impact of April’s $80 million exploit on Rari Capital.
Rari allowed users to supply and borrow any asset in its Fuse pools to earn yields. Users can set up their own pools with a basket of Ethereum-based assets, such as Babylon’s tokens, and other users can deposit funds into those pools to earn yields. The yields are generated as rewards for trading activity on those liquidity pools.
Babylon stored some $30 million in various cryptocurrencies at its peak and was among the top lending pools on Rari with $10 million in user-supplied assets.
The Babylon protocol took a 0.5% management fee and a 5% performance fee on yields offered to users, who supplied its native BABL tokens as collateral for loans on the platform.
But the situation went downhill after Rari cancelled a planned reimbursement to users affected by the exploit, Babylon founder Ramon Recuero said on Wednesday.
Babylon lost $3.4 million during the Rari exploit, and its users withdrew over 75% of their assets in the following days at the time.
As such, the Babylon team was vying to reach $50 million in user-supplied assets, following which it would become sustainable due to the fees charged to users in return for the yields offered. The Rari exploit, coupled with a steep fall in BABL token prices, led to “the point of no return” for Babylon as a sustainable protocol, said.
“Token price crashed from $20 to $5,” Recuero added, “removing any possibility of fundraising future activities from token sales. The token supply is limited, non-inflationary and only 10% remains in the treasury.”
Recuero said the team would return all remaining assets to BABL holders in the coming weeks, including all tokens vested to the founders.
Meanwhile, the price of BABL fell 92% in the past 24 hours, data shows, as traders reacted to the development.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.