A difficult few hours have recently appeared in the Ethereum DeFi space. In the past 24 hours, all of the major DeFi coins have shown negative values: Compound (-18%), Aave (-10%), Curve (-10%), Frax (-6%), and Synthetix (-6%).
Didnt get round to a Valentines drawing. I have been asleep for the past like 3 hours or so. Im so tired 🥲 I have found it difficult to keep up with Twitter recently too. Hoping to get some work done/complete tomorrow as I go away Thursday for a few days!!
— ~Trix~ 💜✨ (@TrixTheLionBun) February 14, 2022
The cause? The leading decentralized exchange for stablecoin swaps, Curve Finance, recently experienced a serious exploit. Fears of a larger Ethereum DeFi massacre have been sparked by the quakes that have been felt throughout the DeFi ecosystem. The exploit starts off potential domino effects that could endanger the peace of the larger DeFi ecosystem, with damages of almost $100 million.
Curve Hack Sparks Fears Of Ethereum DeFi Crash
Analyzing the exploit’s specifics shows the complex processes at work. Attackers used flaws in the Vyper smart contract platform to their advantage, which resulted in Curve Finance suffering large losses. This incident has had significant effects. A ticking time bomb for the remainder of the Ethereum DeFi market may be the well-known stablecoin DEX Curve Finance.
Gentlemen, these last few days have been a long month.
• Vyper exploit
• Curve pools hack
• Mich liq nearing
• Alameda rugs everyone again with Bald
• Leetswap exploit
• SEC v Richard Heart
• Cryptowatch sunsetting
• XRP ruling questioned
• FTX restart confirmed pic.twitter.com/IKYZw1LKcN
— Hsaka (@HsakaTrades) August 1, 2023
More than $45 million has reportedly been taken from third-party providers’ liquidity pools since the event, and another $25 million has reportedly been taken straight from the CRV/ETH pool of the Curve Protocol. Given the millions of Curve (CRV) tokens still owned by the attackers, the next liquidity problem and the potential for additional sell-offs are creating a great deal of concern in the market.
Michael Egorov, the creator of Curve Finance, is not exempt from these large losses. His significant, CRV-backed policies have come under heavy attack, putting the platform in peril. According to Delphi Digital, “Curve founder Michael Egorov presently holds a loan of over $100 million that is secured by 427.5 million CRV, or roughly 47% of the total amount of CRV that is in circulation.
Not All Hope Is Lost
The DeFi sector’s operations, which are only governed by code and math, are untouched by the following pandemonium. As Autism Capital correctly states, “In a way, this shows that DeFi functions as intended. Whoever you are, there are no exceptions or bailouts. The free market is cruel and is controlled by math and code.
#Bitcoin is looking a bit weak, HOWEVER, not all hope is lost quite yet! Let's see what happens with this falling wedge shall we? Here's a real quick update for a few potential scenerios I'm looking to trade
— StuTubeTrading (@StutubeTrading) July 31, 2023
Additionally, there is still hope for a pleasant outcome.
The DeFi sector might find its balance again if liquidity improves. White-hat hackers are believed to be in possession of several million dollars, according to the Curve team. This might make it possible to recover some of the stolen property. A sizable number of CRV tokens were also stolen from the Curve attackers by certain bots.
However, there is still a significant risk of the situation getting worse. While some, like Alchemix, have already stopped using their smart contracts, platforms like Frax, Aave, and others are still on high alert.