Who Got Hurt? The Unknown Market-Maker Losses

Welcome to The Chopping Block — where crypto insiders Haseeb Qureshi, Tom Schmidt, Tarun Chitra, and Robert Leshner chop it up about the latest in crypto. This week, the crew breaks down DeFi’s Black Friday: a brutal week that saw the $120 million Balancer v2 hack, the collapse of Stream Finance, and a market-wide panic that reminded everyone — nothing in crypto is risk-free.

They dive into how one of DeFi’s oldest, most audited contracts failed, why smaller chains froze or rolled back transactions, and what it means for decentralization as Berachain, Sonic, and Polygon took emergency action. The panel debates whether the Balancer attacker used an AI “vibe-coded” exploit, how Ethereum might one day face its own rollback dilemma, and why privacy chains like Zcash may be the last true cypherpunk strongholds.

In the second half, they unpack the off-chain losses behind Stream Finance’s XUSD blow-up, the contagion risk across Euler, Silo, and Morpho, and the hard lessons for “yield-chasing” DeFi vaults. The gang closes with advice for founders weathering the storm — from Tarun’s “cockroach mindset” to Haseeb’s reminder that crypto’s long-term fundamentals haven’t changed.

Whether you’re building in DeFi, securing smart contracts, or surviving the next credit unwind, this episode lays bare the harsh truths — and enduring resilience — of crypto’s frontier markets.

Show highlights

🔹 Market Meltdown Post-“10/10” — The crew dissects October 10’s liquidation shock, lingering rumors about blown-up market makers, and why confidence cratered despite steady fundamentals.

🔹 ADL & Forced Sellers — What auto-deleverage events signaled about thin liquidity and whale-driven order books across perps venues.

🔹 “Nothing Is Risk-Free” — Haseeb’s reminder that there is no crypto “risk-free rate”; even delta-neutral and staking carry hidden smart-contract and market risks.

🔹 Balancer v2 Hack, Explained — Why an OG, heavily-audited E-Pool contract still failed; $120M+ impact across chains and the psychological hit to DeFi’s “battle-tested” narrative.

🔹 AI “Vibe-Coded” Exploit? — The team debates whether attacker logs hint at LLM-assisted discovery vs. expert-guided coding—and why the doomsday “one-shot” scenario isn’t here yet.

🔹 Freeze/Rollback Firestorm — Berachain halted, Sonic froze the attacker, Polygon censored transfers; the panel weighs user protection vs. decentralization purity.

🔹 When Would Ethereum Roll Back? — A thought experiment: is there a loss threshold (e.g., LST or validator-level failure) where even ETH would contemplate extraordinary action?

🔹 Privacy Chains as Last Bastion — Why true no-rollback, censorship-resistant values may persist most credibly on privacy smart-contract chains.

🔹 Builder Mindset in a Doom Cycle — “Be a cockroach”: ignore price, conserve runway, keep shipping; sentiment flips in crypto faster than in any other industry.

Hosts

⭐️Haseeb Qureshi, Managing Partner at Dragonfly

⭐️Robert Leshner, CEO & Co-founder of Superstate

⭐️Tarun Chitra, Managing Partner at Robot Ventures

⭐️Tom Schmidt, General Partner at Dragonfly 

Timestamps

00:00 Intro 

01:01 Market Carnage & Sentiment

04:42 Speculations & Rumors: Wintermute vs. Binance

08:34 Builders’ Advice: Survive & Ship

23:11 Balancer V2 Hack: Berachain & Sonic Labs

28:28 Defi Confidence Shaken Hard

33:26 AI “Vibe-Coded” Exploit Debate

36:18 Rollbacks, Freezes, & Chain Ethics

40:13 Future of Decentralization

48:55 Stream Finance & XUSD Collapse

Disclosures

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