Man loses $500,000 in Ethereum due to wrapping contract

Reddit user u/basubadelmevt has lost $500,000 as a result of misunderstanding how wrapped Ethereum contracts work.

The user is the 265th person to make this mistake but has ensured by far the biggest loss of funds through this misconception.

On January 30 u/basubadelmevt started a Reddit thread asking if they had just lost half a million dollars from the wrapped Ethereum contract.

The responses were that of disbelief and criticism towards the smart contract, but everyone agreed, the funds were lost for good.

This $500,000 mistake was the largest of its kind with the second largest being $300,000 in value roughly six months ago. The half a million dollars in wrapped Ethereum makes up 45% of the total lost tokens in the smart contract.

The wrapped Ethereum contract takes Ethereum coins and turns them into ERC-20 tokens of the same value.

These tokens exist because it allows smart contracts to do more operations than with the coin and allows the token to be utilized on multiple blockchains.

Without wrapping Ethereum, there would be no way for it to function on other blockchains such as Avalanche or Cardano. Many smart contracts, like OpenSea and Uniswap, use wrapped Ethereum over standard Ethereum coins for better interpolarity.

When swapping Ethereum coins to wrapped Ethereum tokens, one just needs to send their coins to the smart contract and wrapped Ethereum tokens will be returned.

The mistake people make is thinking that the smart contract works the same way in reverse. It does not and any tokens sent to the smart contract will be stuck there for eternity. The smart contract does not contain any functions which would allow a user to undo this action.

Unwrapping your tokens is not as easy as wrapping them, but it is not a difficult process. When a user needs to unwrap their Ethereum tokens they can use many front-end applications which will do the process for them. Users can also utilize the Withdraw function on the smart contract if they do not trust front end websites.

The ability to lose this amount of money with no chance of reimbursement is one of the main reasons critics do not believe in cryptocurrency adoption.

Cryptocurrency enthusiasts are quick to point fingers and blame the user for not doing a test transaction before moving such a large amount of funds but the need for custodial products to help the less savvy and the larger institutions is critical for massive adoption

All this user can do now is regret their decision. As another user put it: “At least you have your health.”

Source

Updated: 02/01/2022 — 16:00