Compound Suspends Four Low-liquidity Coins As Loan Assets

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Last Updated on October 26, 2022 by Bitfinsider

The protocol for decentralized lending. On the Compound platform, the usage of four different tokens as lending collateral is now on hold. Because of this, the protocol will not enable users to deposit these assets and will prohibit users from taking out loans. This is done to safeguard the protocol from assaults including market manipulation.

On Monday, the governance members of Compound gave their approval to Proposal-131, which requested that assets with low liquidity be temporarily prevented from being used as loan collateral. 0x (ZRX), Maker (MKR), Basic Attention Token (BAT), and Yearn Finance Token (YRN) are the tokens (YFI). The proposition was approved by the members with an overwhelming majority of votes; the total of 554,126 votes cast in favor of it represented 99.99% of the total votes cast. The idea was rejected by every single voter except one.

According to the proposal, it was determined that each of the four assets in question has adverse liquidity profiles. It is simple to manipulate the prices of assets that have a low level of liquidity. The idea came about after Mango Markets, a well-known loan market on Solana, was hit by a price manipulation attack earlier this month that cost the company a total of $114 million.

On the most recent episode of the Unchained Podcast, Robert Leshner, the founder of Compound and a supporter of Proposal-131, suggested that lending processes should review their risk factors in reaction to the Mango exploit. In addition, he noted that it was a wake-up call for the lending protocols, especially the Compound Finance protocol. Following an independent audit of the codebase used by Compound Finance, it was discovered that specific tokens utilized by Compound had the ability to be manipulated in order to steal funds.

“Every protocol needs to address the risk parameters with the assumption that some malicious hacker will try to exploit it. ” Regarding the Mango Markets vulnerability, Leshner stated, “It’s a great wake up call for every DeFi project on every single blockchain to take this as a wake up call.”


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