The DeFi ecosystem is hit hard: The Euler Finance attack affects multiple projects

Euler Finance, as an innovative project in the Decentralized Finance space, recently encountered a serious security vulnerability. The platform categorizes its assets into different levels based on risk, with each level having unique borrowing permissions. However, the hacker attack that occurred on March 13 resulted in the loss of approximately $200 million, significantly impacting the entire DeFi ecosystem.

As a foundational lending protocol, the security of Euler is particularly important. Due to the composability of DeFi, this attack not only affected Euler itself but also impacted several other DeFi projects, resulting in tens of millions of dollars in collateral damage.

Overview of Affected Projects

Angle Protocol

Angle Protocol is a decentralized non-USD stablecoin project that primarily offers the euro stablecoin agEUR. The project utilizes two minting methods: one is through the core module with a 1:1 exchange for stablecoins, and the other is through the lending module with over-collateralized minting. To enhance yields, Angle has developed yield strategies that deposit part of the funds into platforms like Euler.

The attack resulted in an estimated loss of $17.61 million for Angle. Although there is a surplus of $5.58 million, it is still insufficient for full compensation. agEUR holders, liquidity providers, and hedge token funds will receive compensation on a pro-rata basis.

Balancer

As a decentralized exchange, Balancer suffered a loss of $11.9 million due to bbeUSD (Euler Boosted USD). Balancer’s Boosted Pools innovation allows a portion of the funds to be deposited into lending protocols to enhance yields. This incident affected several trading pairs that use bbeUSD.

Idle Finance

Idle Finance, as a yield aggregator, offers various yield strategies. Due to the selection of high-yield strategies, Euler has become an important partner. This event resulted in Idle Finance incurring a total loss of approximately $10.99 million on Best Yield Vault and Yield Tranches.

Yield Protocol

The liquidity pool part of the fixed-rate lending protocol Yield Protocol is built on Euler. It is expected that the deposit losses will not exceed 1.5 million USD before Euler is attacked. The collateral of borrowers is unaffected as it is stored in Yield Protocol.

Yearn

The yield aggregator Yearn’s yvUSDT and yvUSDC have a total risk exposure of $1.38 million to Euler due to the use of Idle and Angle strategies. Yearn stated that the bad debts will be covered by the Treasury, and all Vaults will continue to operate normally.

Harvest

The USDC, USDT, and WETH Vaults of Harvest are affected due to the use of the Idle strategy. Currently, no specific handling plan has been announced, and users are advised to suspend interactions with these Vaults.

Inverse Finance

The dollar-pegged stablecoin DOLA project Inverse Finance suffered losses from the DOLA/bbeUSD trading pair on Balancer. DOLA Fed lost $860,000 in funds.

SwissBorg

In the Earn strategy of the crypto asset management platform SwissBorg, the ETH and USDT portions suffered losses, accounting for 2.27% and 29.52% of the subscription funds, respectively. SwissBorg has pledged to cover all losses.

Opyn

The Zen Bull strategy of the decentralized options protocol Opyn is affected, which combines the Crab strategy and ETH leveraged long positions. The specific amount of loss and the handling plan have not yet been announced.

Sherlock

The DeFi security provider Sherlock previously provided smart contract auditing and insurance services for Euler. After the attack, Sherlock voted to pay Euler $4.5 million and executed a compensation of $3.3 million.

Sense Finance

The fixed-rate lending protocol Sense Finance has been indirectly affected by trading Idle and other fixed income assets.

The recent attack on Euler Finance reveals the potential risks brought about by the close connections between projects in the DeFi ecosystem. It not only exposes the security vulnerabilities of individual projects but also highlights the need for continuous improvement and strengthening of risk management and security measures across the entire DeFi industry.