BXH security incident caused a loss of $139 million, triggering a chain reaction in Smart Pool.

Recently, the decentralized yield protocol BXH suffered a serious security incident, resulting in approximately $139 million in crypto assets being stolen. This event occurred on the BSC chain, and although assets on Ethereum, OEC, and Heco chains were not affected, all deposit and withdrawal functions across all chains have been suspended for security reasons.

According to an analysis by a blockchain security agency, the attacker transferred project assets from the BXH treasury by gaining administrative access. Currently, some of the stolen funds have been transferred from BSC to ETH, and others have been exchanged for other cryptocurrencies and transferred to new addresses.

This incident has attracted widespread attention, with many questioning why BXH would hand over fund management authority to the attacker and whether there are internal issues. BXH officials stated that this incident was caused by a private key leak and announced a reward of $1 million, hoping to recover the funds with the help of white hat hacker teams.

However, the impact of this incident did not stop at BXH itself. As BXH closed its withdrawal function, the Smart Pool projects that relied on it for generating profits were also forced to suspend their withdrawal functions. Currently, four Smart Pools have been affected, including a project ranked second in locked asset volume on Heco, with an associated amount reaching 150 million US dollars.

What is even more concerning is that some small-scale Smart Pools choose to directly lock their funds in large Smart Pools to amplify their returns. This "lazy operation" makes it difficult for them to escape the impact of this incident. This phenomenon reflects the potential risks present in the current Smart Pool industry.

The profit model of the Smart Pool mainly relies on constantly searching for high-yield lending protocols and earning platform tokens through frequent deposit and withdrawal operations, then amplifying returns through leverage. Although this model can bring considerable returns to investors, it also significantly increases risk. Any problem in any link may lead to the collapse of the entire investment chain.

Therefore, industry insiders call for Smart Pool projects to enhance transparency, publicly disclosing every operation and the flow of funds, allowing investors to make informed choices. Some well-known projects like Yearn have already adopted this practice, where the investment strategies of each fund pool must be discussed and voted on by DAO organization members before being published.

However, many Smart Pool projects, especially some domestic projects, perform poorly in terms of transparency. In this incident, users expressed dissatisfaction with a certain Smart Pool for investing assets into a controversial project, stating that they would not have invested if they had known in advance.

From the perspective of traditional finance, the current operating model of Smart Pool is difficult to sustain. In the traditional world, only banks or large institutions can engage in circular lending to amplify the money multiplier, while ordinary people are subject to regulatory constraints. Although the DeFi world does not have these restrictions, it also means that retail investors face greater risks.

Currently, the risks of Smart Pool products can be divided into three categories: low-risk single asset collateral vaults, medium-risk automated compounding of liquidity tokens and platform tokens, and high-risk multi-layer strategy circular lending.

Industry experts believe that the future development direction of Smart Pool should be to shift towards more specialized and complex financial products. For example, protocols that are based on options combination strategies and synthetic asset arbitrage, which benchmark traditional financial products, have already been validated in the traditional field for their sustainable profit models.

Overall, this incident not only exposed the security risks of DeFi projects but also highlighted the challenges faced by the Smart Pool industry. Effectively controlling risks while pursuing high returns will be the key to the future development of this industry.