On October 31, 2026, this date was marked in both on-chain and computing power narratives: on one side, the decentralized project Flap's official website flap.sh suddenly suffered a DNS hijacking, redirecting users to an unauthorized website. The team had to urgently remind users not to visit the official website, not to connect wallets, and certainly not to perform any signature operations. The weakness of the frontend and domain layer was starkly revealed; on the other side, the artificial intelligence reasoning company Baseten launched a new round of significant fundraising on the same day, planning to raise $2 billion with a maximum target valuation of $30 billion, with Nvidia's support and existing investor Sands Capital expected to lead the round. This indicates that the risk tolerance and expected returns of traditional institutional capital in computing power infrastructure are being repriced. As the structural security risks of the on-chain ecosystem were amplified by a DNS hijacking, and users began to re-evaluate each signature, the computing power sector strengthened the image of "external high growth backed by large institutions" with a high-valuation financing story. This contrast directly influenced funds' risk appetite: risk premia for high-risk DApps and new projects increased, while the willingness to allocate to leading assets like BTC and ETH, as well as off-chain AI computing power, simultaneously strengthened, leading to funds withdrawing from the more vulnerable application layer on-chain and re-queueing their flow toward safer assets and computing power assets.
Flap Official Website Hijacking: Signature Risks Amplify Full-Chain Panic
On October 31, the string of characters that users had been accustomed to typing into the browser, flap.sh, was quietly rewritten into an entry point to an unfamiliar frontend. The tampering of DNS records meant that users still saw the "familiar project" domain name, but technically, the traffic and wallet connections had been handed over to an unauthorized website. For on-chain users, this was not just a simple webpage redirection error but a heavy blow directly to asset security: once a connection, permission confirmation, or signature operation was initiated on the incorrect frontend, signatures that were originally only for interaction could potentially evolve into irreversible confirmations of asset transfers or contract authorizations at any moment. The Flap team immediately issued a reminder requiring users to temporarily refrain from visiting the website, connecting wallets, or performing any signatures, and to pause normal interactions. This action itself was a public acknowledgment that "signature risks can no longer be precisely identified" and quickly amplified into a collective panic within the community regarding the security of the entire frontend and DNS.
When the identity of the attacker, technical details, and actual losses were still unclear, the market's immediate response could only cushion itself by raising risk premiums: not just for Flap, all applications dependent on web frontends and domain access were marked with a higher "uncertainty discount" by the market. In this environment, the willingness to "take one more signature risk" for new DApps and projects sharply decreased, and the expected returns for high-risk on-chain applications had to significantly rise to attract liquidity again; conversely, those assets that did not rely on centralized frontends and had clearer and simpler interaction paths gained relative advantages during the panic. In the short term, the most direct result was that some funds withdrew from high-risk projects that required frequent signatures, flowing back to mainstream assets like BTC and ETH, which have clearer trading structures and more mature narratives, thus allowing them to defensively respond to this systemic unease triggered by a single DNS record by reducing frontend risk exposure.
Wallets and Liquidity Retreat Under the Shadow of Frontend Attacks
When it was confirmed on October 31 that Flap suffered a DNS hijacking, redirecting its official website to an unauthorized site, and officially reminded users not to access the official site, connect wallets, or perform any signature operations, what was truly pressed on pause was not just one frontend entry point but the entire interaction path of "browser - wallet - on-chain contract." Historically, similar frontend or DNS attacks often induce users to authorize or transfer funds through forged interfaces. Once users visually cannot confirm "what this signature is for," the rational response is to reduce all unnecessary signatures—avoiding connections to unfamiliar pages, not granting authorization to new contracts, and not participating in strategies requiring complex interactions. For projects dependent on high-frequency interactions for cold starts, this meant that the user funnel was being choked at the very front: wallet connection rates fell, initial positions could not be entered quickly, and market-making funds were reluctant to place orders, resulting in what should have been a gradually deepening liquidity curve experiencing a "gap period," and this gap was not due to insufficient yields, but because frontends themselves were seen as potential attack vectors.
In this atmosphere, the choices of on-chain funds began to stratify: one part of users simply treated wallets as read-only tools, reducing all new authorizations, keeping funds in a few contracts that were more thoroughly audited and stronger in brand, or directly retreating to assets like BTC and ETH that have simpler interaction paths requiring only basic trade instructions; another part began to withdraw dollar-pegged tokens that were originally deployed across various applications and parked them in centralized platforms or on-chain "pure custody" products, lowering frontend risk exposure by reducing operational frequency. Because the specifics of the Flap attack’s impact on on-chain liquidity and user numbers have not yet been disclosed, the market could only make conservative expectations about potential losses and spillover effects based on past experience, raising the risk premiums for all projects requiring complex signatures. In this wave of trust withdrawal triggered by frontend attacks, the speed at which users reprice signature risks and whether the security narrative holds will determine whether funds remain on-chain or further flow to centralized platforms and mainstream assets.
Baseten Raises $2 Billion: Funds Flock to AI Computing Power
On the same day that on-chain users tightened signatures due to the DNS hijacking, another distinctly different funding story unfolded in the computing power world. Founded in 2019, Baseten plans to raise $2 billion in this fundraising round, with a maximum target valuation of $30 billion. This is no longer an "early project," but a massive fundraising that could rewrite the priority of risk assets. More critically, the existing investor Sands Capital is expected to lead the round, with Nvidia standing behind providing support, indicating that this is not a short-term chase driven by retail sentiment but rather a long-term asset bet by traditional institutions and upstream computing power ecosystems on AI reasoning infrastructure.
In the coordinates of macro capital allocation, such a volume of fundraising is akin to drawing a thick line around "computing power assets." Sands Capital's participation sends a signal to other institutions: amid frequent security events and the current difficulties in thoroughly quantifying on-chain frontend and DNS risks, providing a platform for AI model deployment and reasoning is viewed as a more controllable infrastructure exposure. Nvidia's support further strengthens this understanding—computing power forms a closed loop from chips to reasoning platforms, allowing funds to seek returns on a relatively clear industry chain without facing the additional risks brought by complex contracts, frequent signatures, and opaque frontends.
The result is that some funds originally focused on on-chain infrastructure rounds began to be attracted away by AI computing power opportunities. In the crypto market, security events and external high-return tracks will jointly influence the allocation of funds between BTC, ETH, on-chain applications, and other risk assets. When projects like Baseten announce fundraising targets of $2 billion and a $30 billion valuation, the comparative benchmarks in the minds of dollar capital are reset: both are "infrastructure," but on-chain must first answer the questions of security and trust, while AI reasoning tells the story with growth and industry synergy. How far this round of AI computing power financing can go will directly influence the degree of capital discounting for BTC, ETH, and high-risk on-chain applications in the future.
Reordering Risk Premiums Between On-chain Assets and AI Tracks
On the same day, the Flap official website was hijacked at the DNS level, and the officials urgently advised users to cease using frontends and signatures, while Baseten presented a funding goal of $2 billion and a target valuation of $30 billion. This juxtaposition itself is a clear pricing signal. The Flap incident again brought to the forefront the reality that "frontends and DNS are weak links in on-chain security"—even if the contracts themselves are not problematic, as long as the domain is redirected and the page is spoofed, users can be induced to make malicious signatures or asset transfers. This tail risk was often overlooked previously but is now being systematically incorporated into the premium requirements for high-risk on-chain applications. In contrast, Baseten has been deeply engaged in AI reasoning since 2019, and with support from Nvidia and anticipated leadership from traditional institutional investor Sands Capital, it is classified by capital as a "high growth, strong moat" computing power infrastructure, showcasing a different risk-return structure to the market with a valuation target far surpassing that of most on-chain infrastructure companies: clearer security boundaries and better-told industry synergy stories mean that for dollars willing to bear technological risks, the premium can be more concentrated on AI.
In this comparison, the internal risk premiums within the crypto market began to reorder. Historically, whenever new narratives like AI or RWA emerge, capital rotates between different sectors; now it is more straightforward: at a time when frontend and DNS risks are amplified, mainstream assets like BTC and ETH appear more like "safe havens" within the system. Their premiums stem from macro attributes and liquidity, with security events more reflected in raising return requirements for high-risk DApps and new projects, rather than directly increasing the risk discount of mainstream assets. Conversely, assets related to computing power and AI narratives may receive support from financing news like Baseten's, gaining additional narrative premiums—the market may be more willing to pay higher valuations for targets "close to the underlying computing power," temporarily cooling traditional on-chain narratives. Until the progress of the Flap event repair and the situation of Baseten's financing become clear, this risk premium reordering is still an ongoing process, but it has already been guiding funds to withdraw from high-risk on-chain applications in favor of BTC, ETH, and AI-related assets as the new comparative benchmark.
Checklist for Observing the Next Wave of Security Events and Fund Rotation
At a stage where Flap has not provided a complete recovery timeline and the timeline for Baseten's financing to be realized remains uncertain, the focus for observing the next wave of security events is already on the table: first, to see whether more on-chain applications will proactively reduce their single-point dependence on traditional DNS frontends, migrating key interactions to more decentralized and verifiable entry points; second, whether wallets and routing layers will prioritize domain verification and transaction simulation as default defenses for "professional user actions"; third, whether project frontend operations and permission management will be more transparent, especially regarding domain resolution and certificate change processes. If these changes do not appear in a timely manner, the market will default to perceiving frontends and DNS as still high-risk exposures, maintaining high risk premium requirements for new DApps and long-tail tokens, with funds continuing to lean towards BTC, ETH, and computing-related targets as horizontal comparative benchmarks.
Whether funds continue to migrate from high-risk on-chain assets towards AI computing power and mainstream currencies can be unpacked using several indicators: changes in net inflows and outflows of dollar-pegged assets on-chain, whether the transaction proportion of CEX relative to DEX further increases, and whether the weight of BTC and ETH in total market capitalization and transactions climbs; at the same time, pay attention to the subscription sizes of AI-related assets in traditional institutions and cross-border funds, alongside monitoring the implied volatility, put-call skew of BTC and ETH futures and options. If risk-averse sentiment rises in derivatives while on-chain application liquidity continues to decline, it would mean this round of "rotation from on-chain to computing power and then to mainstream coins" is still strengthening. In medium-term trading strategies, a more reasonable framework is to regard BTC and ETH as relatively low-beta configuration targets in an environment prone to frequent security events, using them to hedge the structural safety discounts of high-risk on-chain applications, while also reserving tail risk positions in derivatives to respond to the potential sudden amplification of pricing across the entire asset structure due to the next frontend attack.
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