$26 million in 'unnecessary liquidations' hit Blast-based lender Pac Finance
An Aave fork on Blast unexpectedly updated its liquidation threshold, causing a large swatch of liquidations.
"Random Aave fork on Blast decreased liquidation threshold (LT) instead of loan to value (LTV) causing $26M worth of unnecessary liquidations," Avara's Stani Kulechov, the creator of Aave, said on X while reposting news of the liquidations.
The developer wallet adjusted a function on Pac Finance’s PoolConfigurator-Proxy contract, which brought down the liquidation threshold of Renzo restaked ether (ezETH) loans without prior announcement or a timelock, resulting in large liquidations.
Reducing the liquidation threshold in a lending platform can cause a surge in liquidations due to the narrower margin of safety it provides for borrowers.
"Fundamental problem with forking code is the lack of in-depth knowledge of the software and the parameters," Kulechov further commented.
Crypto analyst 0xLoki noted that 93% of the liquidations was executed by a single address ( 0x..db3d ), which subsequently profited about 244 ETH from the event.
Pac Finance posted on X that it is aware of the issue and is in contact with impacted users. It also claims to be "actively developing a plan with them to mitigate the issue."
"In our effort to adjust the LTV, we tasked a smart contract engineer to make the necessary changes," the platform explained. "However, it was discovered that the liquidation threshold was altered unexpectedly without prior notification to our team, leading to the current issue."
"Going forward, we will set up a governance contract/timelock and forum for all future upgrades to ensure that discussions are planned ahead of time," it added.
Disclaimer: Larry Cermak, CEO of The Block, is an angel investor in Blast.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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