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Balancer experienced one of the most significant decentralized finance (DeFi) breaches on Monday, with over $116 million in staked Ether and liquidity pool tokens siphoned from Balancer v2 contracts and various forks.
The decentralized exchange (DEX) and automated market maker (AMM) investigated what seemed to be ineffective access control in its smart contracts, which permitted the intruders to remove funds directly from liquidity pools.
The exploit initiated with a $70 million deficit, which escalated to $116 million, mainly impacting liquid staking assets like Lido’s wstETH and StakeWise’s osETH.
In an effort to retrieve losses, Balancer proposed a 20% white hat reward to the attackers. The team cautioned that it’s collaborating with law enforcement and blockchain forensics to track down the perpetrator.
On Tuesday, Balancer faced scrutiny as community members highlighted the comprehensive audits it had been subjected to, only to still fall victim to a hack. “Balancer underwent over 10 audits,” stated Suhail Kakar, a developer relations lead at the TAC blockchain.
The breach also exhibited signs of extensive planning by a proficient attacker. Conor Grogan, director at Coinbase, noted that the hacker appeared to be well-versed and might have funds possibly associated with prior exploits.
On Thursday, Balancer published a preliminary post-mortem report following the $116 million breach. The protocol indicated it was targeted by an advanced code exploit that aimed at its v2 Stable Pools and Composable Stable v5 pools.
DeFi investigators trace $284 million in loans and stablecoin vulnerabilities related to Stream Finance
In another setback for the DeFi sector, decentralized protocol Stream Finance revealed a $93 million loss linked to an external fund manager on Tuesday. The incident prompted stablecoin depeggings and liquidity hold-ups across the ecosystem due to related assets.
DeFi analysts mentioned that the protocol’s failure had a ripple effect throughout DeFi, with millions exposed to the protocol’s synthetic assets. Per researchers from Yields and More, there are over $284 million in loans and stablecoins tied to Stream Finance’s xUSD, xBTC, and xETH.
Numerous interconnected lending markets, including Euler, Solo, Morpho, and Gearbox, were discovered to have exposure via stablecoin loops and vaults, generating contagion risks across the DeFi yields ecosystem.
Funds such as TelosC and Elixir seemed to be among the protocols most impacted, with Elixir’s $68 million exposure constituting around 65% of its stablecoin reserves.
On Friday, Elixir withdrew its support for its synthetic stablecoin deUSD. The protocol stated it had successfully managed redemption for 80% of all deUSD holders, resulting in the token losing its dollar peg.
RedStone unveils DeFi risk evaluations
Modular oracle network RedStone launched Credora, a DeFi-native risk rating platform that integrates real-time credit and collateral analytics into protocols including Morpho and Spark.
RedStone seeks to deliver dynamic risk assessment and default probability data through APIs. This signifies a shift towards data-driven transparency following recent market fluctuations that wiped out $20 billion in positions in October.
The initiative aligns with the broader industry movement towards a lower-risk DeFi ecosystem, where oracles, auditors, and analytics firms unite to evaluate the sustainability of yield and collateral systems.
In addition to RedStone, Chainlink, S&P Global Ratings, and Hacken have also indicated that the next phase of DeFi depends on verifiable creditworthiness rather than speculative yield.
DeFi stakeholders form alliance to promote Ethereum to policymakers
A coalition of leading DeFi protocols established the Ethereum Protocol Advocacy Alliance (EPAA) to enhance Ethereum’s policy representation in Washington. The alliance comprises Aave, Uniswap, Lido, Curve, Spark, Aragon, and The Graph.
The protocols aim to counterbalance the “excessive influence” of centralized crypto firms on shaping US regulation. The coalition intends to directly engage with policymakers on the technical realities of decentralized frameworks.
The EPAA, which is also supported by the Ethereum Foundation, aims to produce educational resources, impart technical knowledge, and coordinate messaging on matters affecting non-custodial systems and DeFi governance.
The alliance aspires to guarantee that on-chain protocols, and not merely centralized initiatives, have a voice in defining crypto’s regulatory future.
Web3 gaming, DeFi drive sector activity in October
DeFi remained one of the most active cryptocurrency sectors in October, despite a general decline in Web3 engagement. As per a DappRadar report, DeFi represented 18.4% of decentralized application (DApp) activity.
The data indicated that DeFi TVL decreased by 6.3% to $221 billion and another 12% in early November to $193 million. DappRadar attributed this to the $20 billion liquidation event in October and the subsequent collapse of Stream Finance.
Regardless, DappRadar noted that protocols like Raydium, Pump.fun, and Jupiter Exchange continued to experience strong usage.
DeFi market summary
Based on data from Cointelegraph Markets Pro and TradingView, the majority of the 100 largest cryptocurrencies by market capitalization finished the week in the negative.
The Stables Labs USDX (USDX) token plummeted by over 69% over the week, marking the steepest decline in the past seven days. This was succeeded by a token named Paparazzi Token (PAPARAZZI), which fell by 54% last week.
Thank you for reading our recap of this week’s most significant DeFi updates. Join us next Friday for more stories, insights, and education regarding this rapidly evolving domain.
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