Two DeFi projects tasked with helping traders in the space hedge risk announced they are shutting down on Saturday.
Cover, an insurance protocol, and Ruler, a debt market without liquidations, lost their developer team and determined that they could not continue, according to a blog post authored by a cofounder of both projects who goes by the online name of DeFi Ted. The projects pledged all treasury assets would return to token holders.
“The decision to do this did not come easy and is a final decision the remaining team made after reviewing the path forward, after the core developers suddenly left the projects,” DeFi Ted wrote.
As of Monday morning, DeFi Pulse shows a total value locked in the Cover Protocol of $836M dollars and $668,000in Ruler. The amount locked in Cover is relatively unchanged since Friday but Ruler is down considerably, from $2.7M. The Ruler token has fallen precipitously since Friday, from $11 to $0.75. The COVER token has fallen from $275 on Friday to $208 Monday morning.
The move wasn’t entirely surprising as there had been signs of turmoil. On Aug. 31, both projects published blog posts reporting members of the development team had left. Technical team members who left were identified as “CryptoPumpkin, Alan, and KryptoCucumber.”
Alan tweeted on Aug. 31, “I have truly appreciated every opportunity I have been given in my time here, but there have been severe consequences on my mental health starting in the past couple months.”
The project then claimed remaining team members were committed to keeping the projects going; “we will move forward together, stronger,” the post said.
One day after announcing team members were leaving, on Sept. 1, each project had a post announcing a seven-day shutdown of their user-interfaces.
The teams continued to appear committed to the projects’ development.
“Over the next week, we will work to secure and transfer ownership of infrastructure, including Ruler Protocol websites and apps,” the Ruler protocol post said.
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It didn’t take long for the remaining members to change course, however. In DeFi Ted’s post, he wrote that “the UI will remain shutdown.”
The post did not give much in the way of detail on the mechanics of returning the treasury assets, other than to say, “Compensation will be as of block number 13162680, this will be used as the snapshot to distribute funds to holders from the treasury. Founders including myself will not take part in this.”
The posts also do not explain what caused the rift with the technical team nor why the remaining members changed their mind about carrying on. DeFi Ted did not immediately reply to a request for comment.
For a project designed to make users feel safer, Cover has had a lot of hiccups.
Following a hack that allowed unlimited minting of its token, Cover Protocol had been slated to become the in-house coverage provider for Yearn Finance in Nov. 2020. Founder Andre Cronje even wrote a blog post explaining how it works. But then the merger broke off in March.
Ruler launched just prior to that breakup. Then Cover v2 was released in May.
It’s been unusual in this new industry for projects to issue refunds to token holders, but not unheard of. For example, in early 2020, DigixDAO, which arose out of a precious metals initial coin offering, voted to return the $64 million in its treasury to token holders.
DeFi Ted closed his post by writing, “The future looks bright for the team that is left and I will be able to enlighten you all to our next steps soon.”