April Shock: Decentralized Faith Tested
Source: aminagroup
Compilation: BitpushNews Yanan
April 2025 has been a difficult month for the cryptocurrency market. The second quarter began off uneventful, but soon began with a series of unexpected events. All of these events have exposed the fragile nature behind some of the industry's most ambitious projects. In this article, we'll break down the latest on-chain dynamics, from the sudden price crash to the more important underlying issues – the state of practice of the concept of decentralization, the effectiveness of risk management, and how protocol governance really works.
The unexpected collapse of Mantra
On April 13, 2025, Mantra, a benchmark project in the real-world asset tokenization space, suffered a dramatic price crash. Its token, $OM, plummeted from $6 to $0.6 in just a few minutes, a staggering 90% drop that wiped out $5.5 billion in market capitalization. The crash not only hit market sentiment hard, but also exposed deep problems in the operation of the project, and even called into question the viability of the entire RWA (real world asset) track.
As a pioneer in bringing traditional assets such as real estate and bonds to the blockchain, Mantra has won the favor of both institutional and retail investors, and its momentum seems unstoppable. However, under the glossy surface, hidden dangers have long been buried - the most critical contradiction is concentrated in the token distribution mechanism of $OM.
The project initially promised to issue 50 million tokens and use a phased unlocking scheme, but quietly adjusted to an ultra-long vesting period of 0.3% per day until 2027 without sufficient communication. While the team claimed that this was for long-term stability, community members generally felt left in the dark: they were not involved in key decisions, and they were increasingly confused about where the project was actually headed.
The fuse of the crash was ignited in the Binance futures market. Within seconds, a series of large short orders came one after another, putting huge selling pressure on the $OM price. Liquidity on other platforms, such as Bybit and OKX, began to dry up almost simultaneously — one of the traders on OKX, who later became known as the "OM Whale," completely ignited panic by pushing prices down with a succession of large sell orders.
On-chain data reveals even more troubling signs. A whale wallet that had been holding coins for more than a year suddenly started transferring large amounts of $OM tokens to the exchange. While a single transfer is not surprising, its timing has resonated horribly with the sell-off on exchanges, accelerating the market's runaway control.
In the end, nearly 4 million $OM were sold in a short period of time, triggering a chain liquidation and completely crushing the market's last line of confidence defense. What appeared to be an organized sell-off quickly turned into a full-blown collapse that shattered the community's trust in the project.
The collapse of Mantra has taught the industry a hard lesson: rebuilding a new order on top of the traditional financial system requires a more rigorous structure than expected. While the promise of tokenization of real-world assets remains promising, this incident clearly demonstrates the need for true transparency, fairness, and resilience to extreme market volatility. Without these foundations, even the best vision can be lost in an instant.
ArbitrumDAO's governance turmoil
A recent farce at the Arbitrum DAO laid bare the weakness of decentralized governance. A user named hitmonlee.eth spent just 5 ETH (about $10,000) to earn $6.5 million worth of 19.5 million ARB token voting rights through the Lobby Finance platform. This platform, which specializes in voting rights delegation, inadvertently opens the door to governance loopholes.
With a huge amount of voting power, the user immediately supported community member CupOJoseph in his candidacy for a seat on the DAO Oversight and Transparency Committee. While the exchange of interests in governance games is not uncommon, the peculiarity of this event lies in the fact that such a large number of voting rights can be bought at such a low price. This discovery immediately caused an uproar in the community, and also forced people to re-examine the true value of the so-called "decentralization" of on-chain governance.
In the face of skepticism, Lobby Finance defended its model, emphasizing that the platform aims to promote transparency in governance and broad participation. However, platforms also acknowledged the shortcomings of existing mechanisms and acknowledged that stricter safeguards may need to be put in place to prevent potential abuse. This statement caused even more waves in the community, as the debate about the direction of governance reform continued to ferment: some members advocated a direct ban on the acquisition of voting rights through capital transactions; Others have proposed a "safe channel" mechanism, requiring funds to flow through trusted channels so that they can intervene in the event of a violation.
Today, decision-making is entirely in the hands of the community. The Arbitrum Foundation has made it clear that it will not administratively interfere with voting transactions, but will leave it up to the community to decide the way forward: should funds be allowed to buy voting rights? How should there be punishment for obvious indulgence? Or should this kind of trading be seen as an inevitable market behavior in decentralized governance?
The controversy points to a more fundamental problem: the inherent flaws of the one-coin, one-vote governance model. The incident laid bare these structural weaknesses. To truly solve the problem, what is needed is not superficial adjustment, but a fundamental reconstruction of the power distribution and decision-making mechanism in the Arbitrum ecosystem.
Hyperliquid's moment of crisis
Hyperliquid has suffered from a series of security breaches since its launch, and the events of a few weeks ago have brought the derivatives trading platform to a near standstill.
In January of this year, a giant whale opened a leveraged position of up to $300 million on ETH. When the trader withdrew $8 million in unrealized profits, the threshold for liquidation was quietly raised. When the market reversed, Hyperliquid's insurance pool – which consisted of the funds deposited by users into the HLP vault – was forced to take over the position, ultimately incurring a loss of about $4 million. The incident exposed serious flaws in platform risk management, but few people realized at the time that this was only the beginning of the crisis.
The real storm struck on March 26th, with a game around the unpopular meme token JELLY nearly destroying the entire protocol. This well-orchestrated attack is textbook-ready:
1. The attacker deposited $3.5 million USDC and shorted JELLY, which has a market capitalization of only $10 million, on Hyperliquid, hitting the platform's leverage limit
2. Another whale holding 126 million JELLY simultaneously sold off in the spot market, causing the price to plummet
3. The attacker quickly withdraws most of the security deposit, creating a shortfall in collateral
4. Hyperliquid's automated clearing system was forced to allow the HLP vault to swallow a short position of 398 million JELLY
5. ATTACKERS THEN BUY JELLY ON CEX, DRIVING THE PRICE UP 300%
When JELLY's price soared, Hyperliquid faced more than $10.5 million in unrealized losses. What's even more frightening is that if the price hits $0.16, the potential loss could swell to $240 million.
Just when Hyperliquid was in deep crisis, major exchanges such as Binance and OKX suddenly launched JELLY perpetual contracts, unexpectedly adding a dramatic twist to the farce. The move was interpreted by some observers as an attempt to drive up prices and weaken Hyperliquid's market position. But the real turning point came 26 minutes ago when the Hyperliquid validator council voted to remove JELLY. Eventually, JELLY's price magically returned to the starting point of shorting, and HLP Treasury not only avoided a catastrophic loss, but instead made a gain of $700,000.
The thrilling escape came at a heavy cost to Hyperliquid: its vaunted decentralized architecture was put on hold to preserve the protocol, revealing that it was still centralized mechanisms that were turning the tide in times of crisis.
The incident revealed a harsh reality: Hyperliquid had to overhaul its systems. While the upgrade is costly, requiring access to the protocol treasury, it is necessary to build long-term resilience. Current platform activity metrics show that they are working in this direction, but no system is perfect. ATTACKERS ARE ALWAYS LOOKING FOR VULNERABILITIES, AS EVIDENCED BY THIS JELLY INCIDENT.
WHILE THE TIMELY DECISION TO DELIST JELLY AVOIDED GREATER LOSSES (AND EVEN NET GAINS), THE DECISION-MAKING PROCESS, WHICH WAS QUICKLY EXECUTED BY A HANDFUL OF VALIDATORS AND SETTLED AT NON-MARKET PRICES, ONCE AGAIN RAISED QUESTIONS ABOUT THE PLATFORM'S DECENTRALIZATION.
Hyperliquid may have weathered the crisis for the time being, and even had a slight surplus on its books. But if it doesn't fundamentally fix the loopholes and improve operational transparency, the platform could overdraw the trust it has built so far. The real test has just begun.
Reflection and enlightenment
The market turmoil of the past few weeks has inexorably revealed the huge chasm between the vision of the crypto space and the reality of the landing. These events send a clear signal that strict risk management, transparent decision-making mechanisms, and robust liquidity management are not the icing on the cake, but the foundation of the project's survival.
For projects like Hyperliquid and Arbitrum, patching vulnerabilities is much more than a technical code update. The real challenge is: how do you rebuild trust in the community? How do you maintain transparency in governance? And how to show due responsibility and response ability in times of crisis?
The collapse of Mantra is a wake-up call for all institutional-oriented projects – an area where sound risk management and smooth operations are not a plus, but a ticket in. Now, the industry is faced with an unavoidable choice: should it deeply learn these lessons that have been exchanged for real money, or continue to dance on the tip of the knife to meet the more violent storm?