Babylon Finance Closes

In this article, we will tell you what you need to know about Babylon Finance and the fact that it had to close its doors.
The protocol will cease its activities in November and wishes to compensate its users. Back to this new failure in DeFi.

What is Babylon Finance?

Babylon Finance is a DeFi protocol hosted on Ethereum. Until recently, the latter made it possible to take advantage of interesting opportunities with many mechanisms such as cost sharing, investment clubs or the DeFi Village.

Babylon Finance's mission was to allow users who know a relevant DeFi return strategy to be able to set it up and share it easily . Different pools of liquidity made it possible to generate returns on Ethereum, BABL or even DAI. Babylon Finance was a modest project with a few million locked in assets.

The protocol had its native token, the BABL , which allowed voting and contributing to the development of the project. So why does the protocol have to cease its activity?

An expensive hack

The protocol was the collateral victim of a large-scale hack. Last April, Rari capital suffered a hack and the theft of more than $80 million in funds. Rari allowed providing and borrowing liquidity from different pools.
The protocol notably allowed its users to create their own pools with different ERC-20 tokens. As is customary, you could generate attractive returns by depositing your funds in one of its liquidity pools.

And that's where Babylon Finance comes in. The protocol which had some $30 million at its highest was using Rari with a loan pool of some $10 million on Rari Capital. Babylon Finance was remunerated by taking a management fee of 0.5% and a performance fee of 5% on these returns offered to users.

Thus, Babylon Finance would have lost almost 3.4 million dollars due to the hack of Rari Capital. Following this hack, trust eroded and users massively withdrew their funds.

Babylon had set itself the bar of 50 million dollars under management to become profitable and to be able to prosper in the long term. This hack will never have made it possible to reach this bar.

After this hack, the native token of Babylon Finance, the BABL plummeted . It quickly went from $20 to $5. Such a fall dealt a fatal blow to the liquidity of the protocol. Indeed, like most protocols, Babylon Finance used the sale of its tokens to continue its development.

Will users get their money back?

Babylon Finance founder Ramon Recuero clarified that all remaining assets would be returned to BABL holders. Recuero said about these events:

"Dealing with the market downturn, one crisis, another, and finally, the aftermath of Rari's hack has been extremely taxing for the team. It's understandable that people were very angry, even though the hack wasn't our fault."

Babylon Finance is therefore added to the long list of protocols or players who will not recover . The bear market and the volatile DeFi environment are unforgiving. This example clearly shows that even with security ensured on the protocol, the various nestings and integrations with other protocols can cause the loss of a project.

At the time of writing the BABL token is trading around $5 after dropping to $0.5 . The protocol has set up a banner on its website to announce its closure. Now the different users just have to be patient.

Indeed, the distribution should start on September 6 for holders of BABL and hBABL (a staked version of the token). It should be noted that no funds will go to teams that recognize their errors and wish to compensate users as a priority.

The closure of the project's website and Discord will take place on November 15th.