After the Curve incident two days ago, the DeFi sector is facing a major crisis of confidence. Among them, the lending platform related to the personal debt of Curve founder Michael Egorov has been on tenterhooks for the past two days.
Egorov has adopted a series of operations to reduce the risk of being liquidated. For example, Curve launched the crvUSD/fFRAX pool, which in turn affected the bond interest rate of the CRV/FRAX pool on Fraxlend, and sold a large number of CRV locked for 6 months in the form of OTC to repay. According to monitoring by Ember, an analyst on the chain, as of 22:00 on August 2, Egorov has sold a total of 59.5 million CRVs in exchange for US$23.8 million in funds.
Curve events seem to have turned for the better (at least DeFi is still there). However, the four core lending platforms like Aave, Fraxlend, Abracadabra, and Inverse that have been drawn into the water are busy preparing for the rainy day, making drastic proposals to the Curve pool, hoping to reduce the risk of future bad debts and serial liquidations.
Odaily Planet Daily took a look at the latest actions of these four platforms, and shared their improvement directions and progress as follows.
Ghost
As the party with the largest debt warehouse, Aave's follow-up measures are the most worthy of everyone's attention. Specifically, how to avoid large positions from affecting the normal operation of the platform?
In fact, there was a liquidation risk from the end of May to mid-June this year. Egorov first bought a luxury house, was sued by three VCs, and then lent a total of 71 million US dollars of stablecoins from Aave (Lookonchain statistics), triggering market panic about it.
In mid-June, ChaosLabs launched a proposal on Aave to reduce CRV LT by 3% to slowly suppress its overheating behavior for such events. The proposal was also passed, but the effect was not obvious enough. (On June 15, CRV fell to the lowest price of 0.558 USDT in the month.)
Gauntlet then suggested freezing CRV on Aave’s governance forum and setting CRV LTV to 0 on Aave v2. details as follows:
It is a pity that this round of proposals did not pass due to insufficient votes and large-scale negative votes. At that time, some voices on Aave’s governance forum believed that this move was not decentralized enough, and that Egorov’s lending scale could not be targeted to restrict the other party.
Recently, the Aave Governance Forum has started discussions on the Curve incident, hoping to minimize the risk of the Aave platform through the previous plan. This move can limit the use of the CRV pool on Aave to a certain extent.
However, Emilio in the governance forum believes that even if the LTV is set to 0, it can still be circumvented by flash loans.
In this regard, Mindao, the founder of dForce, explained to Odaily Planet Daily: "LTV checks require an account equity check, and the deposit, loan and repayment of a transaction in a flash loan will not affect the change of account equity. It is ignored in the V2 mechanism). But this is only a flash loan that can be bypassed. In fact, it can limit new non-flash loan borrowings. This person feels that he is looking for a convenient excuse to oppose any adjustment.”
Fraxlend
As the party with the greatest risk to Egorov in the liquidation turmoil, Fraxlend adopted risk isolation and a special interest rate adjustment mechanism, forcing Egorov to repay debts on the platform first. Fraxlend's better mechanism puts it in a priority position for repayment in this liquidation turmoil.
Abracadabra
In this incident, Abracadabra also acted quickly. It has passed AIP #13.4 to urgently freeze the CRV market liquidation proposal. Although there are only 5 voters, the lack of decentralization of governance at this time reflects the advantages of decision-making efficiency.
Abracadabra subsequently launched AIP #13.5: CRV LP's interest rate adjustment proposal. This proposal redefines the method of obtaining interest, and determines the amount of interest deducted through the product of the corresponding interest rate and mortgage rate. The specific interest rate is as follows:
Egorov still needs to repay about $12 million in MIM, according to current DeBank data.
The nearly 46 hours set aside for Egorov under Abracadabra's new proposal are currently running out, and the situation is not optimistic. Although this move is overbearing, it is effective and aims to reduce its own bad debt risk as soon as possible. With a high probability, Egorov will continue to exchange for MIM to repay the debt through off-market OTC.
Inverse
On the evening of August 2, community member edo issued a proposal for the Curve event. Compared with the first three, Inverse has a relatively low debt position, and the content of the proposal is relatively moderate-reducing the mortgage rate of CRV, cvxCRV, st-yCRV, and cvxFXS, and increasing the liquidation incentives of cvxCRV, st-yCRV, and cvxFXS. The details are as follows:
Inverse's move does not feel like a strong performance, and the community has not yet voted on the proposal.
In general
1. Aave is the most decentralized, but less efficient. The latest proposal introduced above will enter the chain governance process today.
2. Fraxlend has inherent advantages and strong anti-risk ability.
3. Abracadabra responds quickly and new proposals are strong, but the degree of decentralization of governance is not good.
4. According to the proposals of community members, Inverse currently has low strength and has not yet voted.
