The Ethereum-based decentralized finance (DeFi) protocol Aave has suffered an attack led by Avraham Eisenberg. Mango was the controversial figure behind a sophisticated run against Markets. Some people have called this an attack, while some people have called it a clever strategy.
Aave (AAVE) is trading at $57 with losses of 7% and 36% in the last 24 hours and last week respectively. CRV, Curve Finance’s native token, was also part of the attack. The token has experienced significant short-term selling pressure, but showed a positive trend in today’s trading session.
Are you planning an attack on Eve, first try?
Rudy Kadok, founder of portfolio management project Nested, Abbreviation The “Bad Debts” attack on yesterday’s event and Aawe. According to this report, Eisenberg borrowed $83 million from CRV and used $50 million worth of stablecoin USDC as collateral on the decentralized finance platform.
Eisenberg published a thesis in October 2022 in support of this strategy via his Twitter account. It was public and its objectives were fully spelled out: to use its initial capital to influence the price of an illiquid token, such as CRV or Ravencoin, in the hopes of creating “bad debt”. RVN), an additional liability taken over by the protocol.
— Messari (@MessariCrypto) November 22, 2022
To pay off this debt, AAV activates an auction mechanism where AAV is sold on the spot market. Taking a short position on this token would benefit Eisenberg.
I’ve heard that Aave is completely safe, so here’s a possible trading strategy. No financial or legal advice, but if you make 9 figures doing this, feel free to send a tip
Note that starting with more initial capital will increase your chances of success and win rate. pic.twitter.com/HKAF7Y5ogM
— Avraham Eisenberg (@avi_eisen) October 19, 2022
By driving up the price of the underlying collateral, the Aave borrower can move or increase its price by “at least” five times. The attack was unsuccessful, as Kadoch said, due to lack of capital. The actor attempted to destroy a CRV whale to make up for bad debt.
However, while the attack was underway, the team behind Crv Finance released a white paper for a stablecoin, crvUSD. This announcement supported the price of the coin and reversed the trend. Kadok commented:
– $sdCRV, $cvxCRV, $yCRV reduced lots more than 10% off to get $CRV back.
– People pay over 200% to borrow $CRV.
– People don’t tell Aave to be safe while the system was ready for such an event.
Aawe’s future in jeopardy?
On the other hand, the protocol works as intended without any centralized intervention. The team behind Aave claims they will talk to the community and the DAO about the recent incident.
In this sense, the protocol may introduce changes in the coming days to reduce the “risk of long-tail assets”. Many believe that Eisenberg will resume his attack on the protocol once he can raise more capital.
You could call this an attack on AAVE, but I really think they made a mistake by not enforcing a hard limit on how much CRV/other illiquid coins you can use as collateral on AAVE. Otherwise you will have the same problem as FTT.
— Defiac (@TheDEFIac) November 23, 2022
The “Bad Date” attack on Aave was the kind of situation that led to FTX’s demise. The bankrupt company issued a huge amount of its own token, FTT. When real estate prices collapsed, Sam Bankman-Fried’s empire followed suit.
Unlike FTX, as several users pointed out, anyone can access on-chain information about Eisenberg’s transactions, the state of the protocol’s finances, and the amount of bad debts on the balance. This transparency is the main difference between centralized ecosystems and decentralized protocols. The team behind Aave Having said,
Most importantly, today’s events were the opposite of what we’ve seen with centralized entities in the space: transactions were fully traceable and auditable down the chain, providing transparency for users and the community. We do.