Sudden Parameter Change on Pac Finance DeFi App Leads to $24 Million in User Liquidations
Summary:
Pac Finance, a DeFi app running on the Blast network, experienced a sudden parameter change on April 11 reportedly causing a loss of $24 million in liquidations for users. The unexpected alteration to the loan-to-value ratio for Renzo Restaked Ether (ezETH) was deemed arbitrary, impacting borrowers who were unknowingly violating the collateral rules, according to a smart contract developer and industry commentators. Clients of the platform voiced their concerns and demanded explanations on the app's official Discord server.
On April 11, clients of the decentralized finance (DeFi) application, Pac Finance, have allegedly experienced losses worth $24 million as a result of unexpected modifications made by a developer wallet, as indicated by various social media reports and discussions on the app's official Discord server. The Discord administrator for the team has reportedly informed the rest of the crew about this issue. However, a statement addressing the incident has yet to be made public at the time this news was reported.
Pac Finance is a cryptocurrency lending application that operates on the Blast network. Cryptocurrency owners can deposit their digital assets into this platform to earn interest through loaning out their capital. To guarantee that the loans are paid back, the platform only approves a loan amount that correlates to a certain percentage of the collateral. This is known as the "loan-to-value ratio" (LTV). Alterations to the LTV are at the discretion of the development team and are typically announced beforehand.
Blockchain data from the Blast network shows that a function was activated on Pac Finance's PoolConfigurator-Proxy contract by a developer wallet at 1:06 am UTC on April 11. This led to the LTV for Renzo Restaked Ether (ezETH) being set at 60%.
Roffet.eth, a smart contract developer, pointed out that this sudden switch led to "the liquidation of many ezETH leveraging farmers" as these loan takers were unwittingly breaking the collateral rules associated with the protocol. Roffet labeled the unexpected parameter alteration as "arbitrary" given it was seemingly done without any prior notice or warning.
The founder of Parsec Finance, Will Sheehan, also condemned the sudden alteration, asserting that it took place "apparently without warning". Sheehan calculated an estimated loss of around $24 million in collateral by borrowers as their fortunes were automatically traded off to repay their loans triggered by this alteration.
In the wake of the string of liquidations, disgruntled clients of Pac Finance took to the protocol's official Discord server to air their grievances and quest for answers. In a statement, Bountydreams, a Discord moderator for the team announced attempts to reach the team for an explanation, but by 7:55 pm, there has been no response.
Spontaneous liquidations often pose challenges for traders who borrow cash or cryptocurrency on leverage, but these are generally as a result of rapid fluctuations in a cryptocurrency's price and not due to protocol adjustments. On April 2, a flash crash lead to the liquidation of more than $165 million in leveraged Bitcoin trades. Another $110 million in Bitcoin positions were liquidated on April 9 due to an unanticipated surge in price.
This is an ongoing story and will be updated as more information becomes available.
Published At
4/12/2024 12:18:56 AM
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