This time, Chainlink’s quotation plan made a “great contribution”

Author: Azuma

On July 30th, Beijing time, some versions of the smart contract programming language Vyper were found to have serious vulnerabilities, and some important projects including Curve Finance were therefore attacked. (Related reading: “Loss of more than 50 million US dollars, an article to sort out the serial attacks caused by the failure of the programming language Vyper”)

According to the explanation of the Curve team, since some pools (alETH, msETH, pETH) use Vyper’s version 0.2.15 language, the re-entry lock function fails, allowing attackers to execute certain functions multiple times in a single transaction, resulting in a Certain financial losses.

As for the specific amount of loss, according to Paidun’s earlier statistics, it includes Alchemix (alETH issuer), JPEG 'd (pETH issuer), Metronome (msETH issuer), deBridge, Ellipsis, Curve CRV -ETH pool, etc. The combined losses amounted to approximately $52 million.

Fortunately, this extreme instantaneous price was not reported by Chainlink oracles. According to the history of Chainlink’s price feed data, it can be seen that due to the weighted quotation logic of “CEXs + DEXs”, the lowest price quoted by the oracle at the same time point was $0.59. As the most commonly used oracle service in the industry, this “small” quotation difference may help Curve, Aave, and the entire DeFi industry avoid a bigger disaster.

Fortunately, this extreme instantaneous price was not reported by Chainlink oracles. According to the history of Chainlink’s price feed data, it can be seen that due to the weighted quotation logic of “CEXs + DEXs”, the lowest price quoted by the oracle at the same time point was $0.59. As the most commonly used oracle service in the industry, this “small” quotation difference may help Curve, Aave, and the entire DeFi industry avoid a bigger disaster.

We can imagine what DeFi would look like this morning if Chianlink had reported 0.08 instead of 0.59.

First of all, it is certain that the CRV collateralized debt positions on a large number of lending agreements, including Aave, will directly face the risk of liquidation.

Take the position of Curve founder Michael Egorov as an example. He pledged a total of 292 million CRV (about 181 million US dollars) on Aave, FRAXlend, Abracadabr, and Inverse, and lent 110 million US dollars of funds. The comprehensive liquidation price is about Around $0.4. If Chianlink quotes a price of $0.08, there is no doubt that these positions will be liquidated immediately.

In this case, many users, including Michael Egorov, will face financial losses. Considering that the CRV liquidity on the chain at that time was already insufficient, these liquidations were difficult to implement effectively, thus affecting lending agreements such as Aave and FRAXlend Potential threat of bad debts (CRV is almost zero, and it is difficult to make up debts with liquidation sales).

And as the liquidation progresses, CRV will continue to face a greater magnitude of selling pressure, which may intensify the panic in the community (don’t forget that the founder brother will also be taken away at that time), thus triggering a more serious situation .

Overnight, several cornerstones of the DeFi world were severely damaged, which is bound to cause huge collateral effects. It is hard to imagine what the industry will look like after waking up this morning if this happens.

In the community discussion, someone compared Chianlink’s quotation operation this morning to BitMEX, which “unplugged the network cable” at 312. As the contract exchange with the largest trading volume in the industry in 2020, it was down for an hour and a half during the extreme market on 312 , but indirectly prevented the market from further plummeting, so many people jokingly called it “saving the industry”.

Objectively speaking, the situation of Chianlink is still different from that of BitMEX. It is just implementing its own “CEXs + DEXs” weighted quotation logic normally. Although in the eyes of some users, using CEXs as one of the quotation sources is not so decentralized in the DeFi world, but in terms of current market conditions, CEXs still have more comprehensive and stable quotations than DEXs (especially for altcoins ), at least this time, offers from CEXs may have saved the industry.