Aug 7, 2023

Curve Finance has recouped roughly 73% of funds stolen during a hack, which saw the platform lose over $73 million worth of various tokens, according to blockchain security company Peck Shield.

Video transcript

The state of crypto is presented by Tron connecting the world to the power of Cryptocurrency. Curve finance has recouped some 73% of funds stolen during a hack which saw the platform lose over $73 million worth of various tokens according to Blockchain security company, Peck Shield. Joining us now to discuss is Nanson analyst, Sandra Lia. We welcome Sandra. Hi, thanks for having me here. Thanks for being with us this morning. All right, let's talk about the latest with Curve. The exploiter responsible for draining millions of dollars of assets held on. Curve finance has returned some of the stolen crypto. This is according to data that we can all see, talk to us about what's going on, what's happened so far. Yeah, I think um it's important that we sort of talk about what happened with curve. Um So I'll give a bit of context on, you know, what actually went down, right? So this started on July 30th on Sunday where uh curve was exploited. Uh Curve is obviously one of the largest in crypto um And it pioneered the Ve toom model, right, where entities can sort of lock up their tokens and use your uh voting power to direct emissions to their liquidity pools. This uh obviously kickstarted the curve wars, which basically implies that whoever had the largest curve supply was able to direct the most emissions to their liquidity pool. Uh We fast forward to July 30th which was last Sunday where almost 65 million or more uh worth of tokens were drained from some of these curve stable pools. Um Although some of these tokens were obtained by White hat hackers and Mev bots, uh meaning that some funds were actually managed to recovered after all right. Now, we have about 70% recovered. Uh which is quite a big sum, right? And yeah, what does it tell you about D I hacks? You know, we hear about these really large numbers of money that have been extracted from ecosystems by exploiters, Attackers, but very often we see the money get returned. What does it tell you about D I hacks? Yeah, I think it's a, it's a really tricky situation, right? Because we're seeing a lot of these DFI hacks happening left and right. Um But we're also seeing a lot of like white hat hackers sort of returning funds um to the protocols itself. So it doesn't really speak much about the D I ecosystem, but it sort of speaks to um sort of how early we are in D I um the fact that, you know, these protocols um should obviously prioritize more security measures. Um they should, you know, ensure that their smart contracts are fully audited. Um And it's very crucial that you have, you know, a set of reviews for your smart contracts, which um obviously we've seen with the Viper compiler, um sort of exploit that there needs to be more regulation. Um that happens in the D I space. So a couple of things, first of all, do we know why they, the hacker returned? I mean, like, what was the impetus for them to return it? Uh Second of all, I kind of want to ask you about iv's uh OTC uh deals uh because those were kind of interesting and, and what will happen to those but, but first of course, address, why, why give it back? Yeah. So I think um what happened was like curve, the curve team offered a 10% bounty um to the hacker to return funds in exchange for um no prosecution, right? Which we saw how this played out with Mango. Um So this happened at the deadline was like by the sixth of August, which was yesterday. Um So the Viper hacker actually returned about 70% of the fund. Um So what happened was like a couple of these D five protocols, you have curve, you have Metronome, you have Alcamix, uh send a couple of messages on chain to this exploiter. Um You know, in hopes to receive the 10% of the stolen funds and to sort of uh for them to return back the 90% funds, right? Um Otherwise, the funds will be used to uh publicly offer a reward and sort of pursue legal responsibility. Um So after these messages were sent out, and the deadline was sort of um you know, pushed out by the curve team. Um you know, the the hacker actually returned the funds. Um So contagions seem to have been avoided for now, uh the curve price has stabilized. Um thankfully, and the co-founder has also managed to repay most of the debt in the lending pools and, you know, uh namely the five pools um like the B two pool inverse finance and a couple of others. But we had, but those OTC deals that, that he used, I used to, to basically try to keep everything afloat. It, it was a, it was an act of desperation. Uh There were, there were a a and you can explain this uh how it was priced that basically priced curve uh crv at 40 cents when it was trading much higher in the uh in the market. So ee exactly what went on there and how was he able to shore up, uh you know, their, their situation in the meantime. And what happens now, there were a lot of lenders who were trying to play games with him uh and try to get first in the line by basically turning the knife into his back as he when he borrowed it. Correct? Yeah. Yeah. Yeah. So, um I think this uh we would go back to, you know, sort of the price of curve and how this impacted um a lot of the, you know, implications that happened with curve finance, right? Uh So essentially with the exploit that happened, this led to the price of CRV uh which is curves native token sort of plummeting very quickly in a very short time span. Um So this, so this poses a very big problem for uh curve founders, Michael to provide a bit more context here. Um The circulating supply of curve is about 889 million. Um And Michael had just under 50% of this in the lending protocols. So the lending protocols are um two ACARA le inverse finance and silo finance. So these five protocols um and essentially he had over $100 million worth of uh loans taken out against a collateral of 430 million curve tokens. Um So this is obviously a very large sum of um curve and a liquidation would probably see the CRV price completely collapsing as there is um very in insufficient on chain liquidity to support that. Um a collapsing curve would also uh leave protocols with that debt. So for instance, A V would need, would have needed to sell their own native token ave to co cover the deficit. Um Avi would would have likely been able to cover it with their treasury. Um But this would be highly detrimental to their price um similar to Abu Cadabra um inverse finance and Frank's finance, they were also put in similar situations, right? So when the curve price was sort of plummeting, people were monitoring uh Michael's positions and the lending protocols because everything is on chain. So we were tracking his liquidations and what was uh specifically important was his position in Frank's finance, right? So his depth in finance was about 21 million at that time, obviously, his debt in a VB two was much bigger. But essentially finance has this very interesting uh sort of dynamic in their model where um they use something called FRX lens, uh time weighted variable interest rate where the protocol will jack up interest rates if the pool is overused. So if Michael didn't react to um you know, sort of repaying it back, um the FX pool will continue to be at a very high utilization rate. Um It was more, more than 100% at some point and the interest rate would continue to drop. Yeah. So like credit card lenders, loan sharking, it's basically loan sharking. Basically that, that I I my bookie has better rates than that. I just want everyone to know Lawrence. I I can give you his number. Uh I'll fly. He's, he's fantastic. Please don't break my legs guy, Sandra Leslie um will will curve finance be able to recover from this, do you think? Yeah, I think, um, essentially we can sort of make up something about the curve finance and sort of the OTC trade traits, right? So, I guess the redistribution of, uh, the CRV token, obviously co founder had about 50% of these tokens. Um, these otc traits could be perceived as quite bullish. Um, obviously Michael had, you know, such a significant sum of curve. Um, but actually, redistributing this to very large uh and prominent D five counter parties can be seen as a positive network. In fact, for D I, um you're not only sort of supporting curve but you're also um involving, you know, more protocols to, you know, prevent a further cascade. So I think um you're definitely seeing a bit of this maturity in the device system like coming together. All right, Sandra, we're gonna have to leave it there. Thanks so much for joining the show. Thank you so much. That was Nanson analyst, Sandra Leo.

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