Aave Decommissions Low Liquidity Asset Pools To Protect Against Attacks

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Large CRV Trade Left DeFi Lender With $1.6M Bad Debt Last Week

Aave, the lead­ing DeFi mon­ey mar­ket pro­to­col with over $5B in total val­ue locked, has frozen mul­ti­ple low-liq­uid­i­ty asset pools in a bid to pro­tect against attacks like the one tar­get­ing Aave’s CRV pool that caused the pro­to­col to incur $1.6M worth of bad debt last week.

On Nov. 23, a pro­pos­al was pub­lished to Aave’s gov­er­nance forum advo­cat­ing for freez­ing 17 v2 pools in the inter­ests of cau­tion due to their thin liq­uid­i­ty and the volatil­i­ty of the under­ly­ing assets. The pro­pos­al attract­ed near-unan­i­mous support.

On Nov. 27, the changes were exe­cut­ed, halt­ing Aave v2’s YFI, CRV, ZRX, MANA, 1INCH, BAT, sUSD, ENJ, GUSD, AMPL, RAI, USDP, LUSD, xSUSHI, DPI, ren­FIL, and MKR pools.

Eisenberg’s CRV Trade

On Nov. 22, Avra­ham Eisen­berg, the trad­er that exploit­ed Man­go Mar­kets to the tune of $116M in Octo­ber, sought to repli­cate his “prof­itable trad­ing strat­e­gy” by bor­row­ing mil­lions worth of CRV from Aave’s illiq­uid pool to short-sell the token. 

While Eisenberg’s trades appear to have back­fired and result­ed in a sev­en-fig­ure loss for Eisen­berg due to CRV quick­ly rebound­ing in price after Curve released the whitepa­per for its upcom­ing sta­ble­coin, the attack left the Aave pro­to­col with $1.6M worth of bad debt.

While Aave said it has the funds avail­able to cov­er the loss, the pro­to­col is eager to avoid a repeat of the incident.

AAVE is down around 30% in the past month.

AAVE Price, Source: The Defi­ant Terminal

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