Careful When Using Degen Chain Bridge

Or How I Lost 785,000 DEGEN Bridging from Degen Chain to Base 🤦‍♂️

A thread 🧵⬇️

Full-stack web3 developer, learn more about my projects here: https://github.com/tempe-techie 

1/ Today, I wanted to increase my amount of locked DEGEN in the Vault, so I bridged 900k DEGEN (in 2 transactions) from Degen Chain to Base. I received only about 115k DEGEN back on Base.

When I realized what happened, I was confused by two things:

1. Firstly, the amount I received was much lower than I expected (an 87% slippage!!!)

2. Secondly, the bridge transaction concluded in a few minutes, even though the Degen Chain Bridge UI states it’s going to take 7 days.

Let’s investigate further what happened…

2/ 

If you go to the Degen Chain Bridge website (https://bridge.degen.tips/) and prepare a DEGEN bridge transaction from Degen Chain to Base, you will notice the vast difference between the sending and receiving values (in this example, 90k DEGEN vs 38k DEGEN):

3/ This is where I failed in my due diligence because I assumed I would receive on Base the same amount of DEGEN that I sent to the bridge. So, I didn’t pay attention to the receiving number in the UI.

Why did I assume that? 🤔

Because it is the norm with canonical bridges (e.g., the official bridges of L2/L3 chains) that you receive back the same amount as you send. 

Heck, even most commercial bridges will bridge you the same amount (minus a small fee).

4/ Instead, I was more focused on the part that said the bridging process would take 7 days (which is expected from canonical bridges of optimistic chains, which Degen Chain is). 

And the part which said the bridging would cost me a small application fee. This was unusual for a canonical chain, but I was fine with it.

In my case, the application fees for both transactions together were about 1400 DEGEN, which wasn’t too bad. In the example above (bridging 90k DEGEN), the bridge fee is 164 DEGEN:

5/ But this does not explain the vast difference between the send value and receive value (in our example: 90k DEGEN vs. 38k DEGEN). 

Why would you receive so little back? 🤔

When I researched what happened with my bridge transactions, I noticed that the DEGEN I bridged was first swapped to ETH on the Degen Chain. Then, this ETH was bridged to Base, where it was swapped back to DEGEN and sent to my Base address.

6/ 

So in our example (bridging 90k DEGEN), if you submit the bridge transaction, the first thing that happens in the background is that 90k DEGEN gets swapped to 0.069 ETH.

If you check CoinGecko, you’ll see that 90k DEGEN should give you 0.164 ETH instead:

7/ Why such a difference? 🤔

It is because the DEGEN/ETH pool on the Degen Chain has too little liquidity, which means that if you swap a bigger amount, you’ll get much less ETH back (aka big slippage). In the example, instead of 0.164 ETH you only get 0.069 ETH.

This 0.069 ETH then gets bridged over to Base, where it is swapped for 38k DEGEN. And this is how you end up with much less DEGEN than what you started with.

8/ But wait, why does a canonical bridge swap the native coin (DEGEN) into ETH? Why doesn’t it just bridge DEGEN directly without doing a swap in between? 🤔

Well, now we’re getting into the second part of the problem:

It looks like the Degen Chain Bridge does NOT actually use the canonical bridge. This is why DEGEN gets swapped into ETH during the bridging process instead of being sent to Base directly.

And it also explains why the bridging process happens within a few minutes instead of 7 days (which is a normal time period for canonical bridges of optimistic chains).

9/ How to Prevent Swapping Errors Like Mine in the Future

There are three major UI changes that need to be implemented into the Degen Chain Bridge (cc @decentxyz & @jacek):

1. Remove the alert about the 7-day waiting period. This alert is incorrect and leads users to believe they are using a canonical bridge when they are not.

2. The Max slippage value is confusing/incorrect. It leads people to believe that the max slippage for the bridge swap is 1%, which is not true.

3. Disable the Swap button if slippage is greater than 5%. Let the user manually select a higher slippage percentage in the settings. This is a very common practice on DEXes to protect users.

10/ Also, please update the FAQ below the bridge UI:

UPDATE: It seems like Decent (who runs the official bridge website at bridge.degen.tips) has updated the bridge. Now it's back to the canonical bridge, which should send you back the same amount, with a 7-day waiting period.

I sent 10 DEGEN to the canonical bridge for a test. The UI is still problematic, because it does not show you a list of pending transactions. Not sure where I will be able to claim 10 DEGEN a week from now.

The other site that they have, which should show the pending transaction, is not able to find it (yet):

I managed to find the information about the pending transaction.

So apparently you need to set Degen Chain as the "From" chain (and select DEGEN as token), and then set the Base chain as the receiving chain. Then wait a bit and the pending tx will appear above.

Not the smoothest UX...

We’ve made a Degen Bridge Claim Form for those who lost funds bridging from Degen Chain to Base. Bridging should be 1:1, so gather your transaction hashes and amounts to get refunded. Sorry for the hassle—your funds shouldn’t be lost over simple bridging! https://gz2b1hncupx.typeform.com/to/bhFzCnh4

UPDATE 2: Jacek has made a form to collect claims from anyone who's lost funds using the Degen Chain Bridge (bridging DEGEN from Degen Chain to Base). 

Note that this is for the official Degen Chain Bridge claims only (not for the Relay bridge!)

UPDATE 2: Jacek has made a form to collect claims from anyone who's lost funds using the Degen Chain Bridge (bridging DEGEN from Degen Chain to Base). 

Note that this is for the official Degen Chain Bridge claims only (not for the Relay bridge!)

https://warpcast.com/jacek/0x2103a694

TLDR:

(Just saw some incorrect takes, mainly on Twitter, about my thread, so here's a TLDR in one cast.)

First a few definitions:
- Canonical bridge: a native/official bridge with no slippage (always bridges funds 1:1).
- Commercial bridge: unofficial bridge with slippage.

What happened:
- Degen Chain Bridge website was a frontend for the canonical bridge up until a few weeks ago, when it suddenly switched to using a commercial bridge in the background.
- The website frontend did not reflect this change. It still made it appear as though it was using the canonical bridge.
- Also, the switch from using the canonical to the commercial bridge in the background was not announced publicly.
- This led to people (including me) getting rekt when bridging (due to extremely high slippage).
- After my thread, the website switched back to using the canonical bridge in the background.