Decentralized finance (DeFi) protocols are taking steps to protect themselves from the recent hack of Curve Finance and the threat of potentially catastrophic liquidations. Curve founder Michael Egorov’s borrowing of tens of millions of dollars in tokens against his CRV holdings has put a handful of on-chain lending markets in a precarious position. If the price of CRV falls too low and they’re forced to liquidate his collateral at a time when buyers are slim, they could suffer crippling debts – creating a systemic risk for all of DeFi.
The DAO that governs lending platform Abracadabra, from which Egorov had once borrowed $18 million, has approved an emergency measure to prevent any inadvertent selling of CRV tokens that would accumulate bad debt. Teams have also been reinforcing the links that lock DeFi protocols together, with the stablecoin-focused Reserve Protocol asking for help to establish a more robust incident response strategy so that its developers can coordinate across teams during crises such as Curve.
Insurance-like service Nexus Mutual is expecting a wave of new claims when it opens its portal on Wednesday. The protocol is encouraging its customers to wait until more information is available so that it can more accurately assess what they’re owed.
If you do think that’s all likely to go down… it will be Armageddon, said a contributor to the Discord server for liquidity protocol Balancer. I really don’t know where would be safu/better to just exit to mega-cap base assets and centralized stablecoins (get out of DeFi) all together until you feel better about the situation.