Blast-based Pac Finance unexpectedly liquidates users for $26 million

cyptouser2 months agoCryptocurrencies News35
Blast-based lending protocol Pac Finance confirmed that its liquidation threshold was changed unexpectedly without prior information to its team, resulting in significant user losses.

This issue is representative of the ongoing challenges faced by DeFi protocols on the Ethereum layer-2 network, Blast. Last month, Munchables, a web3 game operating on this network, suffered a loss of over $62 million due to an attack. Fortunately, the hacker returned the stolen funds voluntarily.

$26 million liquidation

On April 11, Will Sheehan, the founder of Parsec Finance, reported a “giant swath of ezETH Liquidations on Pac Finance.”

His finding was further corroborated by Kydo, an EigenLabs developer, who stated:

“An EOA wallet (0xae), presumably controlled by Pac_finance, updated the liquidation threshold (allegedly) unannounced, without a timelock. $26 million got liquidated within 6 seconds after the update.”

Pac Finance allows users to earn interest by depositing their crypto holdings. To safeguard against default, borrowers are restricted to loans based on a set percentage of their collateral, known as the “loan-to-value ratio” (LTV). Adjustments to the LTV are infrequent and typically announced by the development team before implementation.

However, on-chain data shows that a developer wallet changed the LTV for Renzo and restaked ETH (ezETH) to 60%. That change meant several borrowers did not meet the collateral rules, hence the liquidation.

Notably, most of the liquidation comes from one user who lost $23.9 million.

Pac Finance response

Pac Finance stated that it is in contact with affected users to develop a mitigation plan. The team also said it is working to prevent a repeat of the incident by setting up a framework where users are notified of every decision before it happens.

The platform added:

“In our effort to adjust the LTV, we tasked a smart contract engineer to make the necessary changes. However, it was discovered that the liquidation threshold was altered unexpectedly without prior notification to our team, leading to the current issue.”

Aave founder Stani Kulechov commented on the situation, attributing the issue to a lack of knowledge of the codebase. Kulechov referred to Pac Finance as a fork of Aave, suggesting that the project uses Aave code as the basis of its platform.

“Random Aave fork on Blast decreased Liquidation Threshold (LT) instead of Loan to Value (LTV) causing $26M worth of unnecessary liquidations.

Fundamental problem with forking code is the lack of in-depth knowledge of the software and the parameters.”

Mentioned in this article
Ethereum Stani Kulechov
The content on this website comes from the Internet. Due to the inconvenience of proofreading the authenticity and accuracy of the copyright or content of some content, it may be temporarily impossible to confirm the authenticity and accuracy of the copyright or content. For copyright issues or other issues caused by this, please Call or email this site. It will be deleted or changed immediately after verification.

related articles

90% of Bitcoin ETF inflows are still retail — VanEck CEO

90% of Bitcoin ETF inflows are still retail — VanEck CEO

1205f261˃Bitcoin (BTC) exchange-traded funds (ETFs) have attracted significant amounts of capital in...

Bitcoin price falls to $65K as $400M crypto market liquidation rocks BTC and altcoins

Bitcoin price falls to $65K as $400M crypto market liquidation rocks BTC and altcoins

1205f261˃Bitcoin (BTC) price saw a sudden 5% drawdown on April 12 as traders with leveraged position...

Phantom Wallet climbs Apple app store charts — Bullish sign for Solana?

Phantom Wallet climbs Apple app store charts — Bullish sign for Solana?

55966e89˃Cryptocurrency wallet Phantom Wallet has now secured the third position on the Apple App St...

US Chamber of Digital Commerce files motion to dismiss SEC case against Binance, likens it to suing grocery store

The ongoing battle between the U.S. Securities and Exchange Commission (SEC) and Binance, a global c...

Hong Kong considers allowing staking for Ethereum ETFs, diverging from US stance

Hong Kong’s Securities and Futures Commission (SFC) is reportedly considering allowing Ethereum ETFs...

Fortune favors something — Eminem takes Crypto​.com mantle from Matt Damon

Fortune favors something — Eminem takes Crypto​.com mantle from Matt Damon

1205f261˃American rapper Marshall Mathers, better known as Eminem, has become one of the latest cele...