On April 11, users of Pac Finance, a lending app available on Blast, reported that approximately $24 million worth of assets had been liquidated unexpectedly. This occurrence was caused by the developer making sudden modifications to the app’s parameters within their digital wallet.
Leveraged traders frequently face mass sell-offs of their crypto holdings. These events usually transpire as a result of market swings rather than adjustments to the underlying protocol settings.
Pac Finance LTV Change Leads to Liquidation
At Pac Finance, crypto owners have the opportunity to make money by lending out their assets. The platform manages this through a system called loan-to-value ratio (LTV). This feature sets a limit on how much borrowers can obtain based on the value of their collateral. The LTV is put in place to ensure that loans are repaid. Normally, the team behind the app communicates any adjustments to the LTV prior to implementation.
On April 11, at 1:06 am UTC, as reported by Blast network’s blockchain data, an unannounced change was made to the Loan-to-Value (LTV) ratio for Renzo Restaked Ether (ezETH) in a developer wallet. This unexpected modification of LTV parameters led to apprehensions within the community, following a $24 million liquidation that occurred mere seconds afterward.
At first, developer Kydo.eth of EigenLabs shared some news, which sparked concerns among Pac Finance users. They took to the official Discord server to express their frustrations and request clarification.
We should be grateful that the incident was limited to only a 26m liquidation
Please, LRT protocols, discourage your users from participating in these protocols
So what happened?
$26m got liquidated on @pac_finance , a lending protocol on blast.
An EOA wallet (0xae),…
— kydo.eth/acc (@0xkydo) April 11, 2024
The Discord moderator, Bountydreams, replied that they are trying to get in touch with the team for more information. But so far, there has been no answer from them.
Protocol Change Raises Concerns Over Security Issues
In the opinion of Roffet.eth, a well-known smart contract developer, a recent parameter adjustment resulted in the liquidation of numerous ezETH farmers due to their collateral no longer meeting the protocol’s requirements. Roffet expressed strong disapproval towards this change, stating that it was made without prior notice.
Will Sheepar, founder of Parsec Finance, criticized the unexpected modification and calculated that around $24 million worth of collateral was lost by borrowers as their assets were swiftly liquidated to repay their loans following the new protocol update.
The liquidation threshold was recently changed, apparently unexpectedly, causing approximately $24 million in liquidations just two blocks afterward. (Credit: @roffett_eth)
— Will Sheehan (@wilburforce_) April 11, 2024
An incident involving Orbit Lending on Blast has brought up more concerns about security issues within the platform. Back in early March, this lending agreement received backlash from influential figures (Key Opinion Leaders or KOLs) over inconsistencies with its liquidation threshold. The agreement specified a threshold of 83%, but it was discovered that liquidations took place at 80% instead. Nevertheless, the project made amends by providing compensation to those affected users.
In addition, Blast’s ecological project Munchables suffered an attack recently, leading to suspicions of a problem with the locking contract and resulting in the theft of 17,400 ETH (valued at approximately $62.3 million). SomaXBT revealed that Munchables had previously engaged an unknown security team, EntersoftTeam, to issue an audit report to reduce audit fees.
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2024-04-12 23:24