Aave to Deactivate Borrowing on xSushi and DPI Highlighting Potential Exploit
Aave token holders are voting on whether or not to patch vulnerability in DeFi’s most important protocol by locking their assets. As per a tweet from Aave, the vulnerability was discovered early this week by members of the Aave community and entailed the use of xSUSHI as collateral. Aave has not provided any other information on the issue.
It has tabled a development plan in order to address the vulnerability. Gauntlet describes itself as a “financial modeling and simulation platform for the blockchain.”
If the plan, known as Aave Improvement Proposal (AIP) 44, is approved, borrowing for xSUSHI, a fee-earning version of decentralized exchange Sushiswap’s SUSHI token, and also DeFi Pulse Index (DPI), an index that includes some of the largest tokens of open finance protocols, will be deactivated, according to the plan’s description.
For the Uniswap and Balancer liquidity provider (LP) tokens, AIP 44 would also prevent them from being used for deposits, borrowing, and rate swaps. In a Twitter thread, Aave described this step as “an additional safeguard.” AIP 44 is very likely to pass because it received more than 575,000 votes in favor and only one vote against it. Voting will continue until the 31st of October.
According to a response posted in the protocol’s Discord channel by Marc Zeller, integration lead at Aave, “the vulnerability is not currently exploitable.” But according to a tweet by Yearn Finance engineer Banteg, the vulnerability was accessible for 160 days in the past when Aave’s deposited assets were comprised differently.
As per DeFiLlama, Aave’s total value locked has decreased by more than 20%, or about $4 billion, to $15 billion as of October 29. In the previous day, Justin Sun, the famous creator of Tron, withdrew more than $4.2 billion from Aave, as per a tweet by Steven Zheng, a scholar at the Blockchain Research Institute.
Since the withdrawal of assets, rates have risen since Aave’s interest rate model, which increases rates when capital is low in order to stimulate loan repayments and further deposits, has been in effect since January.
USDC is giving a yield of over 301 percent, while USDT is offering a yield of approximately 12 percent. According to a tweet by Tyler Reynolds, an avid DeFi member and crypto adviser, they were both higher earlier in the day, with USDC up 43 percent and USDT up 77 percent.