Pac Finance users lost $24 million in a sudden change in borrowing rules
The protocol team has already contacted the victims to develop a compensation plan
12.04.2024 - 10:10
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What’s new? Users of Pac Finance’s DeFi lending protocol on the Ethereum blockchain-based Layer 2 (L2) Blast network experienced liquidation of positions totaling $24 million after the project’s wallet administrator changed the parameters for Renzo Restaked Ether (ezETH) loans without warning on April 11. The Pac Finance team said it has already contacted the affected users and is working on a plan to recover the losses.
What else is known? The company explained that as part of adjusting the Loan-to-Value (LTV) ratio, it tasked a smart contract engineer to make the necessary changes. What led to the current problem was that this was done without prior notice. To avoid a recurrence in the future, the team will introduce a community-managed or time-locked contract, as well as a forum to announce future updates.
Pac Finance allows cryptocurrency holders to deposit funds and earn interest by lending their capital. To ensure repayment, the app only allows borrowers to borrow a certain percentage of their collateral, this percentage is called LTV. The development team can change the LTV, but this is usually only done after the announcement.
According to on-chain data, the developer’s wallet triggered a function in the PoolConfigurator-Proxy contract, setting the LTV for ezETH at 60%. As a result, the borrowers’ positions were automatically liquidated due to a violation of the collateral rules set in the protocol. Their assets were automatically sold off to repay loans due to this change.
Mass liquidations are a frequent problem for leverage traders. However, they usually occur due to sudden changes in the price of the cryptocurrency rather than a change in protocol.
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