Curve Finance Exploit: Implications for DeFi Ecosystem
Over the weekend, Curve Finance experienced a significant exploit, resulting in attackers stealing approximately $70 million worth of assets from users. This exploit has had major implications for the decentralized finance (DeFi) ecosystem, particularly for Curve founder Michael Egorov.
- Egorov has a $70 million loan in USDT on Aave v2, using CRV as collateral.
- The decline in CRV token price due to the exploit has put Egorov’s $168 million lending position at risk of liquidation.
- A forced liquidation could have disastrous implications for CRV’s price and other decentralized lending protocols.
- Egorov’s exposure extends to other protocols, such as borrowing $17 million worth of FRAX stablecoin and having an $18 million loan on Abracadabra.
- Egorov has sold LDO tokens for USDC to shore up his capital.
Aave’s Exposure and Concerns
Egorov’s $70 million loan on Aave v2 poses risks for the protocol if the CRV token’s price drops below certain thresholds. Gauntlet had recommended freezing CRV and setting its loan-to-value to zero on Aave v2 to mitigate the risk of bad debt, but the proposal failed to pass.
De-pegging of GHO Stablecoin
Aave’s GHO stablecoin temporarily lost its peg as a result of the reentrancy attack on Curve Finance. It dropped to $0.96 but has since regained its peg and is currently trading at $0.98.
Other Protocols at Risk
Egorov’s borrowings extend to other protocols, including FRAX and Abracadabra. His actions have raised questions about whether decentralized lending protocols should implement measures to prevent large positions that could introduce systemic risk.
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