Welcome to The Protocol, CoinDesk's weekly cryptocurrency tech development roundup. I'm Margaux Nijkerk, CoinDesk's Tech & Protocols reporter.
This issue covers key network news, including Polyhedra's response to a significant token price drop. Polyhedra, a cryptocurrency protocol, has announced a buyback plan to restore confidence after its token, ZKJ, experienced an over 80% price drop in minutes. An initial post-mortem analysis identified factors contributing to the collapse, including a suspected coordinated liquidity attack on PancakeSwap's ZKJ/KOGE pool, substantial ZKJ deposits by Wintermute into centralized exchanges, and a cascade of liquidations on CEXs like Bybit.
On-chain data shows that several addresses withdrew millions from the ZKJ/KOGE pool, with one address removing approximately $4.3 million in LP tokens and dumping 1.57 million ZKJ. Others followed, unloading close to 1 million ZKJ each, triggering a liquidity spiral when the shallow KOGE/USDT pool couldn't absorb the sell pressure.
In response, Polyhedra's team injected around $30 million in USDT, USDC, and BNB as DEX liquidity and affirmed that no ZKJ holdings belonging to the team were sold. The protocol is conducting a full technical investigation and plans to launch a buyback initiative to offset the attack's impact and deter similar future exploits. Additionally, Optalysys, a UK-based secure computing startup, has introduced the world's first server for blockchains that can process data at scale without decrypting it, using Fully Homomorphic Encryption (FHE).
This server, called LightLocker, offers a cheaper alternative to GPU-based systems, using 40% less energy. Furthermore, the Ink Foundation, the nonprofit behind layer 2 Ink, is launching its native token INK through an airdrop to early users, aiming to bootstrap on-chain capital markets through a liquidity-first strategy. The token will debut on a DeFi lending and trading protocol built on Aave, with a hard cap of 1 billion tokens minted and no governance proposals to change the supply.