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User obtains $1.1M of ApeCoin thanks to a loan, without having BAYC!

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BAYC NFTs have had a huge following as they came right after Crypto Punks. But unlike these, the property rights belong to the holders of the smart contract and therefore of the NFT. Recently Yuga Labs (studio that owns BAYC) announced an ApeCoin airdrop for owners of BAYC and MAYC NFTs.

As a result, someone smarter than the others took advantage of it. And recovered $1.1M linked to 5 NFTs from the famous monkey collection. Here are the details below:

  • The BAYC Monkey ApeCoin Airdrop System Is Way Different
  • He uses a flash loan to borrow 5 NFT BAYC against his collateral
  • A scam or just a stroke of genius?

The ApeCoin Airdrop, A First!

The airdrop system, different from other NFT projects, was perhaps a marketing stunt. Following Yuga Labs ‘ announcement , the price floor for both BAYC and MAYC monkey collections skyrocketed. Up to even exceeding 100 Ethereum (approximately $270,000) for the purchase of a single Bored Ape Yacht Club monkey. 

The studio creator of the collection has therefore decided to launch its cryptocurrency by dedicating 15% of the total supply to the holders of their NFTs

Whoever holds the NFT can then claim the ApeCoin (APE) airdrop. Usually, a snapshot is taken (similar to a screenshot but for decentralized wallet addresses) at an earlier date in order to list the holders. Thanks to this, a person buying an NFT the day after the airdrop will not be able to recover the tokens. Indeed, the date of the snapshot has passed, and the associated wallet is that of the former owner.

Here the creators of Bored Ape and Mutant Ape NFT acted differently. So anyone owning one of these NFTs could claim the ApeCoin tied to them using whatever decentralized wallet they wanted. The problem is that the real owner of the 60,564 ApeCoin had them stolen because someone took advantage of this system. 

 

 

How To Borrow 5 BAYC With A Flashloan

 

One of the most used methods by hackers in the world of DeFi and NFTs is the flash loan (affordable cryptocurrency loan). It is of course necessary to deposit a security collateral, which will be less compared to other loans. The condition is to repay it in the same transaction and the same block, so there is no risk that the loan will not be honored.

On the NFTX platform, it is possible to create a vault. In which we deposit one or more NFTs that we have in order to tokenize them. This token can be sold or staked to earn rewards. Whoever has enough tokens can exchange them for the NFTs in a chest if the sum is equivalent.

Whoever used this technique therefore bought an NFT BAYC for just under $300,000. He used his collateral to borrow via a flash loan system. This then allowed him to borrow a large amount of tokens linked to an NFTX vault containing 5 BAYC ($1.4M at the current floor price).

He was therefore able to recover the 5 monkeys present in the famous chest of the NFTX platform by exchanging the tokens obtained previously.

Now he has 5 Bored Ape Yacht Club in his possession, and only has to claim the associated airdrop. That is 60.564 ApeCoin which he immediately resold on Uniswap for $1.1M or 399 ETH.

He still had to repay his loan. So he did the same loop again but in reverse and sold the 5 BAYCs for NFTX vault tokens. He then repaid the flash loan platform by reselling his NFT monkey used as initial collateral in order to recover his ETH.

 

 

A Scam Or Just A Stroke Of Genius?

 

Lives this method more like a scam or a stroke of genius? The crypto sphere gathers mixed opinions.

Some people on Twitter liken this technique to arbitration. This consists of buying, for example, a crypto on a platform at $10 and reselling it immediately on another at $10.3. This is possible because there are small price differences depending on the exchange used. He was therefore smarter than the others in exploiting this flaw.

But for BlockSecTeam (which carries out audits in the DeFi ecosystem) it’s a whole different story. Indeed the hacker has recovered the ApeCoin intended for the holder of the safe. This one containing the 5 BAYCs by taking advantage of the relaxed conditions due to the Yuga Labs airdrop system.

The BAYC NFT studio could have largely avoided this if they had simply taken a snapshot. Like most projects that offer an airdrop to their user. Was this really something wanted by Yuga Labs in order to increase BAYC sales as well as price floor and hype?

Morally this can be frowned upon given that there has been a theft of rewards by a third party. But what about when the ecosystem and the NFT collection make it possible to promote this kind of practice via their smart contract?

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