On February 5, one of the largest and most important platforms in decentralized finance suffered a blitz lending attack and the loss of millions of dollars from one of its liquidity pools. The incident shows that even big players are insecure, and Yearn is now advising users to insure.
Yearn Finance was the last to be exploited by a flash loan arbitrage attack that effectively played the system because no code was hacked. The incident was the latest in a long line of similar exploits that tormented the DeFi sector in 2020.
In total, $ 11 million was lost in the vault – including $ 2.7 million for the attacker, $ 3.5 million for Curve’s liquidity providers, $ 3.5 million for the Curve investors and $ 1.4 million in Aave v2 fees.
He pointed out that even the biggest platforms in the industry aren’t too big to fall victim to, adding;
“Being the victim of a referee must be humiliating for the team that was once considered unbeatable. […] This attack struck right at the heart of one of the greatest Challenge conglomerates, shaking the foundations of what was once considered an impenetrable fortress.
Attached froze 1.7 million USDT that was stolen in the attack and could burn it, producing more to pay off losses. This would then make it the same as a central bank, the blog said.
Yearn Finance’s response has been a little less constructive for those who have lost funds. He said he was evaluating options to make the fully exploited yDAI vault by creating a Maker CDP (collateralised debt position) with YFI.
However, he claimed that buying insurance one of its partners would be a better option;
“In general, investing in Yearn is at your own risk. If you want to protect yourself from external protocol exploits in the future, please consider purchasing insurance for your deposits with Cover or Nexus mutual.
Protocol founder Andre Cronje reinforced this with a tweet stating that insured people could request reimbursement, however, this is little consolation for those who were not covered.
YFI price update
At time of printing, YFI was trading at $ 31,300. It has gained 37% since the start of 2021 but has not been able to come close to its all-time high in 2020 of $ 44,000.
Meanwhile, the other tokens Challenge protocols like Aave and Uniswap caught fire. Both hit new all-time highs over the past week.
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