Compound Finance approves proposal to restrict tokens borrowing on the protocol | The Financial Express

Compound Finance approves proposal to restrict tokens borrowing on the protocol

According to Cointelegraph, the proposal passed was upheld by financial modelling firm Gauntlet on account of majority of vote

Compound Finance approves proposal to restrict tokens borrowing on the protocol
On November 22, 2022, it was found that Mango Markets hacker Avraham Eisenberg tried exploitation of the protocol through shorting high amounts of Curve

Decentralised finance (DeFi) lending platform Compound Finance has agreed to a proposal for restriction to maximum borrowing of 10 tokens on the protocol, as reported by Cointelegraph.

According to Cointelegraph, on November 28, 2022, the proposal passed was upheld by financial modelling firm Gauntlet on account of majority of vote. It is believed that the total turnout amounted to under seven percent of the COMP tokens in circulation. Reportedly, tokens such as Uniswap and COMP got their borrow limits reduced from 11.25 million and 150,000 to 550,000 and 18,000, respectively, along with less liquid altcoins on Compound such as Yearn.finance got its borrowing cap reduced from 1,500 to 20. 

On the basis of information by Cointelegraph, insights from the Gauntlet stated that the proposal would ensure prevention of “insolvency risk from liquidation cascades,” “price manipulation Mango squeeze exploits,” “risk of high utilisation” and “risk from shorting assets from a short position on Compound of significant size relative to the circulating supply of the asset.” It is believed that Gauntlet did modelling and risk assessment for DeFi lending protocol Aave. 

Moreover, Cointelegraph noted that on November 22, 2022, it was found that Mango Markets hacker Avraham Eisenberg tried exploitation of the protocol through shorting high amounts of Curve (CRV), which forced the protocol’s liquidation at a loss on account of a slippage. Reportedly, the slippage wasn’t anticipated, and Eisenberg reportedly made a loss of $10 million in the attack post a CRV short squeeze. Further, Gauntlet gave the proposal of freezing a range of tokens on Aave v2 which can face implications of an exploit due to lack of liquidity.

(With insights from Cointelegraph)

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First published on: 29-11-2022 at 13:01 IST