Aave Decommissions Low Liquidity Asset Pools To Defend Against Threats

To protect against attacks, Aave decommissions low liquidity asset pools. Last week, a large CRV trade left DeFi Lender with a $1.6M bad debt.

Aave, the leading DeFi money market protocol with over $5 billion in total value locked, has frozen multiple low-liquidity asset pools in order to protect against attacks like the one last week that caused the protocol to incur $1.6 million in bad debt by targeting its CRV pool.

On November 23, a proposal to the firm’s governance forum was published, advocating for the freezing of 17 v2 pools out of caution due to their thin liquidity and the volatility of the underlying assets. The proposal received nearly unanimous approval.

The changes went into effect on November 27, halting Aave v2’s YFI, CRV, ZRX, MANA, 1INCH, BAT, sUSD, ENJ, GUSD, AMPL, RAI, USDP, LUSD, xSUSHI, DPI, renFIL, and MKR pools.

On November 22, Avraham Eisenberg, the trader who profited $116 million from Mango Markets in October, attempted to replicate his “profitable trading strategy” by borrowing millions of CRV from Aave’s illiquid pool to short-sell the token.

While Eisenberg’s trades appear to have backfired, with CRV quickly rebounding in price after Curve released the whitepaper for its upcoming stablecoin, the attack left the Aave protocol with $1.6M in bad debt.

While Aave stated that it has sufficient funds to cover the loss, the protocol is eager to avoid a repeat of the incident.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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