CRV Exposure Risk Snowballs the DeFi Ecosystem: Finance Redefined

Welcome to Finance Redefined, your weekly dose of essential decentralized finance (DeFi) news – a newsletter designed to bring you the most significant developments of the past week.

The $47 million Curve Finance exploit on July 30 had a domino effect on the DeFi ecosystem, primarily due to the Curve founder’s $100 million loan against the native Curve DAO (CRV) token. the platform. Several lending protocols have been rushing with new governance proposals to minimize the risk of CRV exposure as the token price fluctuates. On August 3, the native stablecoin of the crvUSD ecosystem pulled out due to market conditions.

Considered the backbone of the DeFi ecosystem, the Curve exploit could trigger a serious crisis.

The Curve crisis has also had a negative impact on the price of DeFi tokens, with a majority trading in the red on the weekly charts.

Curve Finance pools mined over $47 million due to reentrancy vulnerability

Multiple stablecoins on Curve Finance using Vyper were mined on July 30, with losses reaching over $47 million. According to Vyper, its versions 0.2.15, 0.2.16, and 0.3.0 are vulnerable to malfunctioning reentrancy locks.

“The investigation is ongoing, but any projects relying on these builds should contact us immediately,” Vyper wrote on X (formerly Twitter). Based on an analysis of affected contracts by security firm Ancilia, 136 contracts used Vyper 0.2.15 with reentrant protection, 98 used Vyper 0.2.16, and 226 used Vyper 0.3.0.

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CEX Price Feed Prevents Curve Price From Crash Amid $100M Vulnerability

CRV price crashed in the DeFi market due to major emptying of several pools; however, it was ultimately saved by the centralized exchange price feed. CRV reached $0.086 on decentralized exchanges but traded at $0.60 on centralized exchanges (CEX), preventing the price of the token from crashing to zero.

Curve pools use Chainlink’s oracle system, which integrates multiple price feeds, including centralized exchanges. Without the CEX price feed, Curve Finance would have collapsed. This ironic incident caught the attention of Binance CEO Changpeng Zhao, who said that in the end, it was a CEX price stream that saved the DeFi protocol.

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Curve Finance Founder’s $100M Debt Could Trigger DeFi Implosion: Report

While Curve Finance is still weathering the fallout from its recent $47 million hack, another issue involving holders of the DeFi protocol token has surfaced on the internet, sparking theories about how a massive dump could potentially occur.

On August 1, crypto research firm Delphi Digital published an X thread detailing loans taken by Curve Finance founder Michael Egorov, which are backed by 47% of CRV’s outstanding supply. According to the research firm, Egorov holds approximately $100 million in loans on various loan protocols backed by 427.5 million CRV.

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Curve’s crvUSD declines as market reacts to shock events

Curve Finance native stablecoin crvUSD briefly pulled out on August 3, reacting to an uncertain environment surrounding the protocol following its recent exploit. On that day, the stablecoin fell 0.35% before regaining its peg to the US dollar.

Curve’s crvUSD uses a mechanism to maintain its peg called the PegKeeper algorithm, which manages the interest rate and liquidation ratio based on stablecoin supply and demand to maintain its value. In other words, it ensures that the crvUSD value is properly collateralized while balancing supply and demand.

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DeFi market overview

The total market value of DeFi saw a bearish drop last week. Data from Cointelegraph Markets Pro and TradingView shows that the top 100 DeFi tokens by market capitalization had a bad week, with most tokens trading in the red. The total value locked in DeFi protocols remained below $50 billion.

Thanks for reading our roundup of the most notable DeFi developments from this week. Join us next Friday for more stories, ideas and insights into this dynamically evolving space.