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

cyptouser4 months agoCryptocurrencies News104
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

Russia contemplating permanently legalizing stablecoins for cross-border payments

The Russian government is contemplating the official legalization of stablecoins for international t...

Asymmetry, Ampleforth launch afUSD to rival Ethena’s synthetic dollar

55966e89˃The United States dollar is exhibiting strong performance in 2024, as is the market for dig...

Bybit crypto exchange launches trading platform in the Netherlands

25cc9d4a˃Bybit, one of the world’s largest cryptocurrency exchanges by trading volumes, is expanding...

Konami partners with Avalanche for Resella NFT platform launch

55966e89˃Japanese game developer and publisher Konami Digital Entertainment has announced its collab...

Elon Musk faces uphill battle against SEC subpoena, experts say

Elon Musk faces a challenging scenario in his attempt to contest the U.S. Securities and Exchange Co...

Tron network deposits drop to 6-month low as TRX price rallies — Trouble in paradise?

Tron network deposits drop to 6-month low as TRX price rallies — Trouble in paradise?

55966e89˃TRX (TRX), the native token of the Tron network, saw a month-to-date increase of 9.5% in Ju...