Curve Finance Founder Repays 93% of $10M Debt Following Protocol's Soft Liquidation
Summary:
Michael Egorov, founder of DeFi protocol Curve Finance, has reportedly repaid 93% of a $10 million bad debt sparked by the protocol's soft liquidation. The financial incident also led to a 28% plunge in Curve's native token, CRV. The deficit was the outcome of Egorov's massive borrowing, which the market could not handle. To remedy the token's value, Egorov has proposed the burn of 10% of the outstanding CRV tokens and assured a three-month APY boost on platform deposits for active voters. Prior situations reveal Egorov's history of large borrowings impacting the protocol during duress. Currently, Curve holds firm as the 19th largest DeFi protocol with over $2 billion in locked crypto assets.
Michael Egorov, the creator of the decentralized finance (DeFi) platform Curve Finance, has reportedly repaid 93% of a $10 million bad debt that arose as a result of an earlier soft liquidation of the protocol. Egorov stated his positions were too substantial for the market to accommodate, leading to the $10 million bad debt. He assured that he has already compensated 93% of the debt and plans to pay off the remainder expeditiously.
As of June 13, Curve Finance's soft liquidation method had undergone an actual trial during a recent hack attempt. Despite this successful test, the CRV token's value, the protocol's native token, plummeted by over 28% amid the upheaval. According to blockchain analytics company Arkham Intelligence, Egorov himself bore $140 million in liquidations due to his borrowing of $95.7M primarily in crvUSD against $141M in CRV through five different accounts on five different protocols.
At the hack's pinnacle, Egorov was faced with an annual fee of $60 million to sustain his borrowings. As per Arkham's explanation, this was due to the scarcity of available crvUSD for collateral against CRV on Llamalend. With three of Egorov's accounts already comprising more than 90% of the borrowed crvUSD on Llamalend, further depreciation of about 10% in CRV's price could trigger their liquidation.
In response to this situation, Egorov proposed the elimination of 10% of the prevailing CRV tokens, equating to $37 million, to restore the token price to its level before the incident. Egorov also explained that those actively voting would gain a three-month APY surge on all deposits across the platform.
Egorov's holdings in CRV and his borrowing activities had previously posed similar challenges to the protocol under stress. In August 2023, Curve experienced an exploit leading to $62 million in losses, which also resulted from Egorov's then $100 million borrowing. The DeFi founder eventually reimbursed these funds.
Currently, with over $2 billion in cryptocurrency assets secured within its contracts, Curve ranks as the 19th most significant DeFi protocol as per blockchain analytics tool DeFiLlama. According to a related report, Curve Finance awarded a developer with $250K for identifying a re-entrancy vulnerability.
Published At
6/13/2024 9:52:56 PM
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