The Curve exchange hack last month served as an indictment of the prevailing decentralized finance (DeFi) narrative since last year’s collapse of Sam Bankman-Fried’s FTX crypto exchange – that centralized platforms are susceptible to greed and poor risk management while decentralized platforms keep chugging along. Curve, a crucial DEX on Ethereum, was hacked for over $70 million, causing the price of its native token, CRV, to drop by more than 20%. Fears around the security and viability of Curve, widely considered a blue chip crypto exchange, were fueled, and attention was drawn to a risky lending position from Curve’s founder, Michael Egorov, who put up 33% of the supply of CRV to back personal loans. I think Curve will have issues now as a result of people second-guessing the Curve token, said Sid Powell, CEO of Maple Finance. It is kind of like a melting iceberg scenario, where they have to find some way to add or recreate utility for CRV. The long-term viability of Curve’s CRV reward program seems less certain now, in light of the CRV price declines. The Curve exploit served as a reminder that scale does not equal security, and it drew attention to the myriad avenues by which attackers can theoretically sabotage decentralized systems. The fact that the founder of blue chip decentralized finance protocol was able to amass more than a third of its native token’s supply – and then put it up as collateral to back millions of dollars in loans – should have raised eyebrows, according to experts, due to its potential ramifications for the protocol and for DeFi as a whole. On-chain transactions do not represent the asset exposure that the underlying trader necessarily has, said Sacha Ghebali, a strategy analyst at crypto analytics firm The TIE. It’s no different from traditional financial markets.
The Curve Exchange Hack: A Reckoning for DeFi and a Warning for Crypto
