• Aave, a DeFi protocol, cleared its bad CRV debt resulting from an exploit attempt by Avi Eisenberg.
• The debt was cleared following a governance vote where the community approved the procurement of the necessary CRV tokens using the ParaSwap decentralized exchange aggregator.
• The maneuver came ahead of the activation of Aave v3, a major tech upgrade of the protocol.
Aave, a decentralized finance (DeFi) protocol, recently cleared the bad debt of 2.7 million of curve dao tokens (CRV) from a botched November trade by Mango Markets exploiter Avi Eisenberg, blockchain data on Etherscan shows. The move came ahead of the activation of a major tech upgrade of the protocol called Aave v3.
The debt was cleared following a governance vote where the community approved the procurement of the necessary CRV tokens using the ParaSwap decentralized exchange aggregator. Aave is governed by a decentralized autonomous organization (DAO) and AAVE token holders vote on proposals.
In November, Avraham Eisenberg roiled Aave with a trading strategy that involved borrowing tens of millions of CRV tokens from the platform. After a sudden price spike due to a short squeeze, his position got liquidated, leaving Aave with bad debt in CRV that amounted to $1.6 million at the time.
An analysis by DeFi data platform EigenPhi found that the liquidator of the bad debt pocketed some of the tokens instead of returning them to Aave. This resulted in the loss of CRV tokens from Aave’s balance sheet, as well as a significant amount of ETH.
The procurement of the necessary CRV tokens was done through the ParaSwap decentralized exchange aggregator in order to minimize the risk of another attack. The tokens were then burned, removing them from circulation and restoring the balance sheet of Aave.
The move not only restored the balance sheet of Aave but also sent a positive signal to the market that Aave is committed to protecting its users and their investments. The news also came ahead of the activation of Aave v3, a major tech upgrade of the protocol.
The upgrade, which is planned to go live in April, will introduce new features such as Flash Loans, Protocol Staking and Liquidity Insurance to the Aave protocol. Flash Loans will allow users to borrow funds without putting up any collateral, while Protocol Staking will reward users for providing liquidity to the platform. Liquidity Insurance, on the other hand, will provide protection against impermanent loss.
The news of Aave’s debt clearance and the upcoming v3 upgrade has been welcomed by the crypto community, with many praising the protocol for its commitment to security and for introducing new features that will improve the user experience.