Curve Founder Egorov Clears $10M Debt Amidst Hacking Crisis; Token Stability Measures Suggested
Summary:
Curve founder, Michael Egorov, professes to have cleared a $10 million debt resulting from soft liquidations during a hacking attempt in June. The incident led to a 28% decline in Curve's token, CRV. Egorov suggested burning 10% of CRV tokens, valued at $37 million, for price stabilization, while also offering a higher APY to the proposal's voter base. Despite the crisis, the platform’s soft liquidation mechanism functioned well, shedding positive light on Curve's stability amidst debt crises.
Curve founder Michael Egorov has successfully cleared the $10 million debt that was borne out of soft liquidations following a hacking attempt on the 13th of June. In the aftermath of the event, Egorov took to the internet to clarify that his positions were too sizable for the markets to withstand, which resulted in a $10 million debt, around 93% of which he claimed to have cleared at the time.
The attempted hack on 13th June instigated soft liquidations of Egorov's holdings due to a sudden surge in borrowing costs. At the peak of the crisis, Egorov was staring at $140 million in liquidations that were precipitated by a stablecoin debt of $95 million, and a yearly fee of $60 million to keep his positions available.
Further exacerbating the situation, Curve's token, CRV, took a massive hit during the incident, with its value plummeting by 28%. To remedy the situation, Egorov suggested burning 10% of CRV tokens, which were valued at $37 million, in order to stabilize the token's price, and promised greater APY as an incentive for those who voted in favor of this proposal.
Related: Curve Finance grants dev $250K for discovering a reentrancy vulnerability.
Egorov's critical debt positions and their potential risk to Curve's stability have been a contentious issue for some time, first being brought to attention in a Delphi Digital report from 2023. The report inferred that Egorov's $100 million loans across various DeFi protocols had the potential to trigger a collapse in DeFi markets.
Notwithstanding the heavy strain placed on the Curve platform, its soft liquidation mechanism, through LLAMMA, worked effectively as intended, so says Curve founder Michael Egorov. "The system performed brilliantly, providing ample time for liquidators to organize funds and OTC-liquidate the hacker's position. Consequently, the system was purged of the hacker's funds and bad debt, leaving it running as efficiently as before."
The soft liquidation mechanism gradually diminishes a borrower's "health" as a debtor and carefully liquidates their funds. A hard liquidation of the borrower's assets and a complete settlement of that loan are initiated by the mechanism once the borrower's health plunges to 0%. Magazine: Beyond crypto: Zero-knowledge proofs exhibit potential in areas spanning voting to finance.
Published At
6/15/2024 5:42:02 AM
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