The entire worth of property locked on decentralized finance protocol Curve Finance (CRV) plunged almost 50% within the final 24 hours to $1.731 billion from $3.26 billion recorded on July 30, in line with DeFiLlama data.
The exodus might be attributed to an exploit of the protocol, which elevated fears of liquidation and dangerous debt amongst neighborhood members who instantly withdrew their property from the crypto mission.
Vyper vulnerability impacts Curve Finance
On July 30, a malfunctioning ‘reentrancy locks vulnerability’ was discovered on a number of variations of Vyper, a wise contract language for the Ethereum (ETH) digital machine (EVM). The programming language confirmed the incident, revealing that crypto initiatives working Vyper 0.2.15, 0.2.16, and 0.3.0 could possibly be impacted.
Following the information, Curve Finance stated that a few of its steady swimming pools working Vyper 0.2.15 had exploited the malfunctioning reentrancy lock vulnerability.
A reentrancy assault permits an attacker to empty funds of a weak contract by repeatedly calling the withdraw operate earlier than it updates its steadiness. This assault has been generally used to exploit a number of DeFi protocols.
BlockSec, a blockchain safety agency, said the reentrancy assault may probably threat all swimming pools with wrapped Ether (WETH).
Whereas it was unclear how a lot was stolen from Curve Finance’s stablecoin swimming pools, some estimates suggest that as a lot as $70 million may need been stolen.
CRV’s worth tank
The exploit has made Curve’s CRV token extremely risky, with its worth dumping by round 15% to $0.64707 on the time of writing, in line with CryptoSlate’s data.
In the meantime, CRV’s on-chain worth hit lows of $0.109 as liquidity tapered off after the CRV/ETH pool was attacked.
South Korean crypto trade Upbit suspended deposits and withdrawals for the token, citing vulnerabilities found on the DeFi mission’s platform. The trade additional warned that CRV’s worth was “experiencing important volatility.”
Unhealthy debt and contagion fears
With hackers holding a big quantity of CRV, there are considerations that the token’s worth would possibly fall additional if they begin promoting. This presents a contagion threat as a result of Curve founder Michael Egorov used the token as collateral on a number of lending protocols, together with Aave.
With Egorov having over $100 million in CRV as collateral on Aave, Inverse, and Abracadabra, a liquidation resulting from a drop in CRV worth will have an effect on Curve and all of the protocols.
To keep away from liquidation, Egorov has been paying down among the loans. Nonetheless, this won’t forestall dangerous debt and spillover results for different lending protocols uncovered to Curve.
In the meantime, Aave Ethereum v2 model has turned off the CRV borrowing operate. Wu Blockchain reported that this was most likely executed to forestall merchants from utilizing the Curve vulnerability to panic and the malicious shorting of borrowed CRV to advertise serial liquidation.