Recent Aave Exploit Attempt Shows Once Again The Vulnerabilities of Decentralized Finance

•On Nov. 23, one day after Mango Markets exploiter Avraham Eisenberg attempted to use a series of sophisticated short sales to exploit decentralized finance protocol Aave, project contributors put forth a series of proposals to deal with the aftermath

• As told by protocol engineering developer Llama and financial modeling platform Gauntlet both of whom are deployed on Aave: Eisenberg miscalculated Aave’s liquidity levels when attempting his short sale attack, which ultimately failed.

• Llama wrote that the user had been liquidated but at the cost of $1.6 million in bad debt, likely due to slippage. Going forward, Llama’s proposal calls upon the Gauntlet’s insolvency fund and Aave Treasury to make whole the bad debt.

• Another separate proposal put forth by Gauntlet calls for temporarily freezing a list of token markets (including CRV) on Aave V2.

AAVE attack

The past few days have been eventful for the decentralized finance protocol Aave. On Nov. 23, one day after Mango Markets exploiter Avraham Eisenberg attempted to use a series of sophisticated short sales to exploit Aave, project contributors put forth a series of proposals to deal with the aftermath. As told by protocol engineering developer Llama and financial modeling platform Gauntlet, both of whom are deployed on Aave: Eisenberg miscalculated Aave’s liquidity levels when attempting his short sale attack, which ultimately failed.

Llama wrote that the user had been liquidated but at the cost of $1.6 million in bad debt, likely due to slippage. Going forward, Llama’s proposal calls upon the Gauntlet’s insolvency fund and Aave Treasury to make whole the bad debt. Another separate proposal put forth by Gauntlet calls for temporarily freezing a list of token markets (including CRV) on Aave V2. This would prevent any new orders from being placed on those markets until further notice, in order to protect users and mitigate potential losses. These proposals are currently under discussion by the Aave team and community members, and a final decision has not yet been made. In the meantime, it is important for holders of Aave tokens and other cryptocurrencies to remain vigilant against similar attacks.

The weakness of DeFi is still there

The events of the past few days have shown that decentralized finance is not immune to attack. On Nov. 23, one day after Mango Markets exploiter Avraham Eisenberg attempted to use a series of sophisticated short sales to exploit decentralized finance protocol Aave, project contributors put forth a series of proposals to deal with the aftermath. As told by protocol engineering developer Llama and financial modeling platform Gauntlet both of whom are deployed on Aave: Eisenberg miscalculated Aave’s liquidity levels when attempting his short sale attack, which ultimately failed. Llama wrote that the user had been liquidated but at the cost of $1.6 million in bad debt, likely due to slippage. Going forward, Llama’s proposal calls upon the Gauntlet’s insolvency fund and Aave Treasury ledger address to make whole the bad debt.

A separate proposal put forth by Gauntlet called for temporarily freezing a list of token markets (including CRV) on Aave V2 in order to prevent any new orders from being placed on those markets until further notice, thereby protecting users and mitigating potential losses. These proposals are currently under discussion by the Aave team and community members; however, no final decision has been made as of yet. Consequently, it is essential for holders of Aave tokens and other cryptocurrencies to be mindful of similar attacks in the future.

It is important to note that decentralized finance protocols have risen in popularity in recent months due in part to their increased yield potential compared to other forms of finance; however, they do come with certain risks that potential investors should be aware of before committing their funds.

Recently, the Defi space saw its first major attack which targeted the popular protocol Aave. The attack was unsuccessful but highlighted some of the risks associated with investing in decentralized finance protocols. As these protocols become more popular, it is important for investors to be mindful of their increased levels of risk. In light of these events, the Aave team is currently discussing proposals on how to best mitigate similar attacks in the future.No decisions have been made to these proposals as of yet; however, it is important for investors to stay vigilant and aware of these risks going forward.

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