In the wake of the tumultuous August 17 cryptocurrency market crash, a notable development has emerged involving the Venus lending protocol. An orchestrated liquidation of a $30 million Binance Coin (BNB) position, directly linked to the perpetrator of a massive $560 million hack, has transpired.
The strategic move to liquidate this position was executed manually by the BNB Core team. This action was necessitated by BNB’s price plummeting below the $220 threshold. The initiative adhered to a governance proposition that had gained approval in November 2022 through the Venus protocol. This proposal mandated the implementation of manual liquidation procedures, aimed at mitigating the adverse impact of an on-chain margin call. Such a scenario had the potential to destabilize BNB’s market value, thereby posing a systemic risk to the wider decentralized finance (DeFi) landscape within the BNB Chain network.
Currently, BNB is trading at $215.8, reflecting a notable decline of 38% since the mid-April period, as reported by CoinGecko. Conversely, within the last 24 hours, Venus’ native token, XVS, has experienced a 6.5% surge in value.
Key to the narrative is the hacker’s exploitation of the BNB Chain bridge in October 2022. This nefarious act enabled the hacker to generate 2 million BNB tokens. Out of these, 900,000 BNB were subsequently utilized as collateral to secure a staggering $150 million worth of stablecoins from the Venus protocol.
As the events unfolded in the aftermath of the recent market upheaval, Venus issued a statement affirming the stabilization of the exploiter account linked to the BNB Bridge incident. Notably, BNB Chain leveraged whitelisted liquidation processes to fulfill its commitment, safeguarding against shortfalls or cascading impacts on BNB.
Venus, a significant presence within the BNB Chain network, stands as the second-largest DeFi protocol, boasting a substantial total value locked of $600 million.
This incident serves as a pertinent illustration of the intricate trade-offs inherent to varying degrees of centralization that diverse smart contract networks offer. BNB Chain’s proactive intervention underscores its resolve to curtail the risk inherent in liquidation actions.
Conversely, a different scenario unfolded for Michael Egorov, the founder of Curve Finance. Operating within the Ethereum ecosystem, Egorov grappled with a distinct challenge involving lending protocols. Concerns rippled across the crypto community as the price trajectory of CRV, Curve’s native asset, hinted at potential declines. This prompted fears of substantial nine-figure liquidations taking place on-chain.
The catalyst for this apprehension stemmed from exploits that targeted Vyper, a smart contract coding language integral to Curve. These exploits, transpiring on July 30, precipitated a sudden plummet in CRV’s valuation. The subsequent volatility imperiled countless CRV-backed loans, amounting to hundreds of millions of dollars.
In response, Egorov executed strategic maneuvers, selling a significant portion of his CRV holdings through over-the-counter transactions. This decisive action, while undertaken below prevailing market value, was aimed at alleviating his debts tied to Ethereum-based lending protocols.
