The Ethereum DeFi space is currently experiencing a rough few hours. All major DeFi coins are posting deep red numbers in the last 24 hours: Compound (-18%), Aave (-10%), Curve (-10%), Frax (-6%), and Synthetix (-6%).
The reason? Curve Finance, a flagship decentralized exchange specializing in stablecoin swaps, recently suffered a significant exploit. The resulting aftershocks are being felt across the DeFi ecosystem, inciting fears of a broader Ethereum DeFi massacre. The exploit, causing a damage of around $100 million, sets off potential domino effects threatening the stability of the wider DeFi landscape.
Curve Hack Sparks Fears Of Ethereum DeFi Crash
Delving into the details of the exploit reveals the intricate dynamics at play. The attackers took advantage of vulnerabilities in the Vyper smart contract software, leading to the significant losses on Curve Finance. The repercussions of this incident have been profound. The popular stablecoin DEX Curve Finance could be a ticking time bomb for the rest of the Ethereum DeFi sector.
Post-incident, it is reported that over $45 million has been drained from liquidity pools of third-party providers, with an additional $25 million directly siphoned from the Curve Protocol’s CRV/ETH pool. The ensuing liquidity crisis and the impending risk of further sell-offs, given the millions of Curve (CRV) tokens still held by the attackers, is generating substantial anxiety within the market.
The founder of Curve Finance, Michael Egorov, has not been immune to these significant losses. His large positions backed by CRV have come under intense pressure, pushing the platform to the brink. Delphi Digital explains, “Curve founder, Michael Egorov, currently has a ~$100 million loan backed by 427.5 million CRV (about 47% of the entire CRV circulating supply). With CRV down 10% over the past 24 hours, the health of Curve is in jeopardy.”
Furthermore, Egorov holds large loans on Aave and Frax Finance, backed by CRV collateral. On Aave, he has a $305 million CRV backed loan amounting to 63.2 million USDT. At a liquidation threshold of 55%, his position could be liquidated if CRV/USDT hits $0.3767. As per Delphi Digital’s assessment, this would require a ~33% drop in the CRV price. Egorov also carries a ~4% APY for this loan.
The situation on Frax Finance is even more precarious. Here, Egorov has supplied 59 million CRV against 15.8 million FRAX of debt. The high utilization and the Time-Weighted Variable Interest…
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