Ethan Lou: A Hamilton teen genius ‘hacked’ millions in crypto — but he may not be in the wrong 

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Imagine a man who counts cards in blackjack and wins all the money in the casino. Indeed, some casinos may kick out guys. But that’s it. The card counter exploited a vulnerability in the game, but he followed all the rules. There is nothing illegal.

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Or is there?

There’s something like a cryptocurrency version of that scenario taking place in a Toronto court, involving a 19-year-old genius from Hamilton. In this case, the focus is on the cryptographic concept of decentralized finance (DeFi). And it touches on some of the same legal and ethical issues as the recent collapse of the US $ 45 billion Terra project: Losing money in an open source crypto project where people have publicly available code. If so, can they blame anyone other than themselves?

Hamilton’s teenage Andean Mejedovich graduated from high school at the age of 14 and already had a master’s degree in mathematics from the University of Waterloo at the age of 18.

The Medjedovic case is at the heart of a DeFi project called Indexed Finance, a type of index fund for the crypto market. Being DeFi, the project tried to achieve its goal without humans. Everything is code.

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Indexed Finance, like most DeFi projects, runs on the Ethereum network established by Vitalik Buterin of Canada. Such projects are popular. By November of last year, the value of all cryptocurrencies held by DeFi services exceeded US $ 247 billion, an increase of 1,700% year-on-year, but given the recent plunge in crypto value, it’s far today. There is no doubt that it is low.

However, such projects have potential vulnerabilities that go beyond the wider volatility of cryptocurrencies. If everything is determined by the code, the weaknesses of the code can mean millions of losses. Also, for DeFi, a common standard for proving that the proponent himself is not a scammer is to publicly post the code behind the project.

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These two items are not a good combination. On October 14, 2021, Mededvich operated an indexed finance platform to make it possible to buy coins at a very discounted price and, as later publicly acknowledged, dismissed US $ 16 million worth of cryptocurrencies. rice field.

The supporters behind Indexed Finance have sued Medjedovic. As a result, some platform users lost money by saying they “hacked” the project.

However, Mededvich states that he has never had improper access to unauthorized access. Some software developers have a spirit of code, and Mededvich said he did only what was permitted by the publicly available rules of the project.

In investment, anyone who makes money earns it from those who lose money. All other users of Index Finance were trying to make money from someone. According to Medjedovic’s logic, he was no different, just a knowledgeable user.

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In this case, who is wrong and who is right is very similar to the problem of terra implosion. This is one of the causes of the recent brutal Bitcoin crash, and the value of Bitcoin has now been reduced by more than half from its peak in November 2021 to about US $ 20,000.

Terra is also a DeFi project. It is called “stablecoin” TerraUSD, a cryptocurrency fixed one-to-one with the US dollar. Terra sought to maintain its pegs through a trading system that leveraged the code of another coin, Luna. No humans needed.

That code didn’t work. The lost Terra was a dollar peg in May, and both it and Luna fell to near zero. Investors have lost US $ 45 billion. Terra founder Do Kwon is facing a criminal investigation in his hometown of South Korea, and the US Securities and Exchange Commission is also investigating a platform implosion.

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This case is clearly different from the indexed finance case, but at the heart of it is the same issue. Those who lost money were trying to profit from others and were involved in the project with all the related issues. Information that can be used freely.

DeFi’s core belief is that humans are the weaknesses of any system. However, the idea forgets that the code is a human product and therefore inherits human weaknesses that can be exploited. How Indexed Finance, especially the Terra case, concludes will have a significant impact on the future of this $ 1 billion DeFi industry.

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Even Judge Fred Myers of the Toronto case states that the issue raises “an interesting, timely and important issue regarding the relationship between common law and blockchain technology.” Benjamin Bathgate of McMillanLLP states that he is acting on behalf of an unnamed Indexed Finance user or group of users and could be the first case to test the question of whether the code is really legal.

But for now, this case may not dig deeper into the matter.

That’s because Mejedovich apparently packed and executed the proceedings instead of dealing with them. Judge Myers ordered his arrest, and the case was virtually deadlocked until Mededvich was found.

Ethan Roux Journalist and Former Bitcoin Miner: Cryptocurrency Wild West Scandal and Confusion..

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