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The Aave community is aiming to decrease its protocol exposure to the Curve DAO token, with two proposals currently available for voting as of Aug. 10. This initiative is intended to mitigate the risk to the lending protocol posed by the substantial borrowing position held by Curve Finance founder Michael Egorov.
Curve DAO (CRV) serves as the native token for the decentralized finance (DeFi) protocol Curve Finance. Egorov has utilized over 30% of CRV’s overall market capitalization as collateral to secure nearly $60 million in loans on Aave v2. However, the hack that occurred on July 30 adversely affected Curve’s token price, rendering Egorov’s position susceptible to liquidation.
Until Aug. 12, Aave tokenholders have the opportunity to vote on two proposals. One proposal aims to lower the liquidation threshold for CRV on Aave v2 by 6%, which could lead to user accounts being at risk of liquidation upon approval. The second proposal seeks to prohibit borrowing of CRV on Ethereum and Polygon v3, thereby eliminating the option to short CRV through the Aave protocol.
Proposal to reduce the liquidation threshold for CRV on Aave v2 on Ethereum. Source: Aave
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As of this writing, more than 571,000 votes have been submitted, with 100% of holders in favor of limiting Aave’s exposure to CRV.
In light of concerns regarding liquidation related to Egorov’s loans, the Aave community is also voting on a third proposal that concludes on Aug. 11. In this proposal, Aave Chan founder Marc Zeller advocates for the Aave Treasury to acquire $2 million worth of CRV tokens from Curve, asserting that it would demonstrate DeFi participants’ support for the ecosystem’s stability. At the time of writing, 62.91% of voters are in favor of the purchase, while 37.09% oppose it.
Curve’s attack has raised concerns about potential cascading effects throughout the DeFi ecosystem. The hack was linked to a vulnerability in three versions of Vyper — a widely used programming language among DeFi protocols. This vulnerability led to a confrontation between white hat and black hat hackers on-chain, competing over exploit attempts and the recovery of funds. A portion of the stolen assets has been returned by the attacker. Curve Finance is offering a bug bounty for anyone who can identify the perpetrator.
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