Amid an ongoing situation that has put the entire DeFi ecosystem under stress since Sunday, security firms are floating proposals to prevent future loans against $158 million worth of Curve (CRV) tokens on Aave, a lending and borrowing platform. Gauntlet, a risk management specialist, posted the proposal on Wednesday to the Aave community members, who have until August 5 to vote on the proposal.
We recommend setting CRV LTV to 0 to help impede additional borrowing against existing CRV collateral due to the recent decrease in CRV liquidity, the proposal read. The loan-to-value (LTV) ratio is a measure comparing the amount of any collateral asset to the loan’s size. A zero LTV effectively means loans cannot be taken.
The exploit on Curve Finance, a stablecoin swapping giant, on Sunday drove down the price of the CRV token, putting a $168 million stash of founder Michael Egorov’s money at risk of being liquidated. This created bearish sentiment for the tokens among traders alongside concerns that liquidated assets would have to be sold into a market where prices are already falling.
In an effort to shore up liquidity, wealthy DeFi players such as Justin Sun have stepped up to purchase discounted CRV from Egorov. Security firms are now proposing preventative measures to protect the DeFi ecosystem from further losses.