On November 23, one day after Mango Markets exploiter Avraham Eisenberg tried to use a a series of sophisticated short sales to use the decentralized financial protocol Aave, project contributors have enforce a series of suggestions on how to deal with the consequences. As protocol developer Llama and financial modeling platform Gauntlet said, both are deployed on Aave:
“During the past week, user 0x57e04786e231af3343562c062e0d058f25dace9e [wallet associated with Eisenberg] opened a short position on CRV [Curve] using USDC as collateral. At its peak, the user was shorting ~92 million CRV units (approximately $60 million at today’s prices). An attempt to short CRV on Aave was unsuccessful and the user lost ~$10 million in liquidations.”
Llama wrote that the user was liquidated, but at the cost of $1.6 million in bad debt, presumably due to the slippage. “This excessive debt is isolated only to the CRV market,” the firm wrote. “While this is a small amount in relation to Aave’s total debt and within the limits of Aave’s safety module, it is best practice to recapitalize the system to be the entire CRV market.”
Going forward, Llam’s proposal calls for the insolvency fund Gauntlet and Aave Treasury to pay off the bad debt. Another separate proposition presented by the Gauntlet requires freeze temporarily list of token markets (including CRV) on Aave V2. The day before, Eisenberg tried to trigger a liquidity crisis on Aave by shorting a large amount of CRV that was illiquid on the platform, forcing smart contracts to buy back losing positions due to very high slippage (more than 90%). . However, the deal fell through when Eisenberg was disposed of with a much lower slip than expected.