The Aave community has initiated steps to mitigate the protocol's exposure to the Curve DAO token, a move intended to minimize potential risks stemming from significant lending positions associated with Curve Finance founder Michael Egorov. With two proposals up for voting on August 10, the community aims To safeguard the lending protocol from vulnerabilities linked to the sizable CRV holdings.
Curve DAO (CRV) is the native token of Curve Finance, a decentralized finance (DeFi) protocol. Egorov had secured loans exceeding $60 million on Aave v2, backed by over 30% of CRV's total market capitalization. However, the recent hack of Curve Finance on July 30 led to a drop in CRV's token price, rendering Egorov's position susceptible to liquidation.
Aave token holders are currently participating in the voting process, which extends until August 12, for two distinct proposals. One seeks to reduce the liquidation threshold for CRV on Aave v2 by 6%, potentially resulting in account liquidations upon approval. The second proposal intends to disable borrowing CRV on both Ethereum and Polygon v3, effectively preventing shorting of CRV through the Aave protocol. As of now, the majority of voters are in favor of curtailing Aave's investment exposure to CRV.
In response to concerns regarding Egorov's possible liquidation, the Aave community is also deliberating on a third proposal that concludes on August 11. This proposal, suggested by Aave Chan founder Marc Zeller, advocates for the Aave Treasury to purchase $2 million worth of CRV tokens from Curve, aiming to exhibit support for the DeFi ecosystem's vitality. Currently, a majority of voters endorse the purchase, while a minority opposes it.
The Curve Finance hack has raised alarms about potential reverberations within the broader DeFi landscape. The exploit was linked to vulnerabilities in different versions of Vyper, a programming language used across various DeFi protocols. This incident sparked a confrontation between white hat and black hat hackers for exploit attempts and fund recovery. While some funds have been returned, Curve Finance has offered a bug bounty for identifying the responsible party.
