Getting Technical with Tulip: A Response to HelloMoon
Disclaimer: All conversation screenshots were taken from the public channel #tulipreversal in HelloMoon’s official Discord server at the time of posting.
After 72 hours of compiling transactions and reviewing the many unfounded and damaging claims against our protocol by an ecosystem participant — who we thought would have more integrity — we are posting our response to the recent HelloMoon blog piece accusing Tulip Protocol of misusing user funds. We would like to clarify and address these accusations to provide transparency and clarity to our community, the ecosystem, and most importantly, our users. As a team that always prioritizes our users’ interests, we would like to reaffirm that no user has ever experienced a loss of capital due to bad debt on the Tulip platform.
In regards to the claims made by HelloMoon, we would like to clarify the context of our relationship. The only prior communication that Tulip has had with HelloMoon was in October 2022, when HelloMoon was a 3rd party contractor to one of our vendors and was contracted, by our vendor, to index Tulip data. During those conversations, we provided responses to all of HelloMoon’s inquiries. None of the concerns mentioned in their recent blog post were ever brought up in any prior communication between Tulip and HelloMoon before they published their blog post.
We question the motive and the integrity of HelloMoon, as they have used information provided to them as a 3rd party contractor to one of our vendors to make these false accusations and cause undue harm to the Tulip platform. The team’s reputation was also dragged through the mud, causing duress among the Tulip team and its users from HelloMoon’s hasty and unsubstantiated claim. We are currently reviewing all legal contracts between Tulip and our Vendor, and our Vendor and HelloMoon. We will take all necessary actions to ensure this type of behavior never happens again in our ecosystem.
The Timeline
On April 26, 2023, we were made aware of accusations against Tulip through a Tweet claiming that our Discord was deleted and that our platform had “rugged”.
The following announcement was up in HelloMoon’s Discord for almost 6 hours before being removed. Tulip has used the same vanity invite link, https://discord.gg/tulip since the rebrand from SolFarm to Tulip on October 5, 2021. We inquired with HelloMoon and they claimed that the Discord was inaccessible to them thus they made the statement below. It seems unlikely that a platform with 190 million monthly average users would coincidentally bug out when they’re trying to reach out in their time of need.
This twitter content was not only circulated by HelloMoon’s company twitter accounts and many customers of HelloMoon, but also by HelloMoon’s Founder’s personal twitter account.
It is important to note that we became aware of these accusations at the same time as the public. There was no outreach from the HelloMoon team regarding their concerns or questions outlined in their original blog post. As stated earlier, the only conversations were in regards to HelloMoon as a 3rd party contractor to our vendor. Those conversations ended on October 20, 2022 with all questions answered and requested information provided for the specific scope of work. The below tweet is categorically false and we request immediate removal of it from Twitter and a public apology from HelloMoon.
The team has attempted to clarify with HelloMoon as to when they had attempted to reach out but we are yet to receive a response.
Along with these false accusations, Solana Mobile, in their sole discretion, decided to “hide” the Tulip Protocol dAPP (which was already reviewed, approved, and on the dAPP store) from the Solana dAPP store. Solana Mobile took this action without any warning and without any communication with Tulip with regards to the claims received. They took HelloMoon’s false accusations as truth and for that we are extremely disappointed. We understand that Solana Mobile intends to safeguard their users but at the same time, Tulip is not an unknown entity to them being one of the earliest DeFi dAPP on Solana, an early Solana Foundation grant recipient, one of the few dAPPs to achieve 1B TVL. Our hope is that Solana Mobile introduces more transparency into their processes moving forward.
The Claims
HelloMoon raised concerns about funds being sent to an “undocumented account”. To answer this question, one needs to understand how Tulip Protocol liquidations work.
Leveraged Yield Farming on Tulip launched in August of 2021. The program was written pre Anchor and the transaction size limit was restrictive as the majority of modern day transaction compute cost savings was not available at the time. The program itself can only liquidate a position in the same liquidity pool in the AMM. This solution was inelegant but was the best functional one given the resources available at the time.
For example, a DFL/USDC position on Raydium can only be liquidated in the DFL/USDC liquidity pool on Raydium. This creates multiple issues with on-chain liquidity . Popular leverage yield farming pairs historically attracted speculators as an alternative to directional exposure. In a volatile market, this can cause a liquidation cascade. The forced selling can exacerbate, leading to large capital losses for positions due to inability to liquidate in an orderly manner. In other scenarios, Tulip leveraged positions end up being a large percentage of the liquidity. This effectively disallows the protocol from selling into the LP pair, as the slippage incurred would be astronomical, leading to capital losses to users.
In order to combat this risk and to protect users, an operational system was created such that if a liquidation was to occur and be of a size that cannot be automatically liquidated efficiently in the pool by our liquidation bots, the liquidation will trigger our safeguards and is paused and the Tulip team is notified. The position to be liquidated would then be reviewed alongside existing on-chain liquidity. In certain scenarios, the liquidation would continue to be processed. If on-chain liquidity is not sufficient to mitigate market impact or slippage, the position control transferred to a wallet and a manual liquidation would be required. This is to ensure an orderly liquidation to avoid introducing further volatility and possible liquidation cascades. Manual liquidation can involve swaps on other DEXes or TWAP selling on a centralized exchange. Note: Manual intervention is not needed for the vast majority of liquidations.
For example, if the position was on Raydium, the position assets could be manually liquidated on Orca, Serum, or at times FTX. What HelloMoon chose to omit in their blog post is the second half of the liquidation process: Once the funds are liquidated on the outside venue, the capital is sent back to the leveraged yield farming program, position debts are paid off, and capital is returned to lending pools. This misunderstanding of why certain Tulip positions would move to these wallets could have been entirely avoided if HelloMoon had chosen to inquire with us about our liquidation process.
The Facts
On April 28, 2023, HelloMoon provided their final set of questions regarding Tulip transactions:
For context, $400k of discrepancy was owing to a miscalculation by HelloMoon team.
The following document shows all transactions, proving that all funds that Hellomoon falsely accused as stolen are, in fact, accounted for.
https://docs.google.com/spreadsheets/d/1VgHrl5F_Ze-OPHO_hILBVgHGoAbwnnIVspNwaMWaN5E/
With this, the final set of questions & “claims” made by HelloMoon has been answered in full. We have always and will continue to welcome all open dialogue about our protocol operations, even if it may seem unorthodox (ie. closed source). We cannot accept baseless accusations and scavenging for witchhunts.
As of April 29, 2023, our mobile dAPP has been reinstated from the Solana dAPP store.
We understand that misunderstandings and confusion can arise in any situation, but we believe that the malicious language used by the HelloMoon team in their accusations was unwarranted and outright libelous. In a Web2 world, lawsuits are practically guaranteed for this kind of reckless accusations. The blockchain industry is already in a fragile state from the cataclysmic events of 2022. Throwing around baseless accusations and gaslighting victims of libel are the last things our industry and users need.
We demand that HelloMoon provide a formal retraction all of their accusatory content, incorrect claims, and submit a public apology for their actions and the harmful impact it has had on the Solana community and wider blockchain industry.
To our Community and Friends
We know the past 72 hours have not been easy on you. We thank each and every one of you for your outreach and support.
Tulip has always and will continue to always do what is in the best interest of our community, our partners and most importantly our users. From day one, security has been the number one priority. Tulip has operated for the past 24 months with no user losing funds to unnecessary bad debt or to exploitation of the protocol, even while the Solana DeFi ecosystem and broader crypto markets have struggled. We look forward to continuing this journey with you and to share in the good times that lie ahead.
To HelloMoon
We hope that you keep up your efforts of looking into the ecosystem, as you are proud of mentioning. Perhaps you can consider other “unusual” protocols for scrutiny, if closed source was a criterion, and hopefully with the same level of persistence you have shown Tulip. But open and good faith communication with your ecosystem partners is always the healthiest and safest route–for the entire community.
In closing a message to Walker, CEO and Founder of HelloMoon, some things are better left unsaid. Recommend no more news like these, for the sake of the people, our industry (and your business).
Sincerely,
The Anon Frogs @ Tulip Protocol
