A $30 million BNB position tied to the perpetrator of a $560 million hack was liquidated on the Venus lending protocol during the crypto market crash on August 17.
The move sheds light on the intricate dynamics of the crypto ecosystem and the measures taken to safeguard against potential risks.
The BNB Core team took proactive action by manually liquidating the controversial BNB position as the price of BNB plummeted below $220.
This decision was guided by a November 2022 governance proposal endorsed by Venus. Opting for manual liquidation aimed to minimize the potential repercussions of an on-chain margin call, a situation that could have jeopardized BNB’s stability and posed a contagion risk to the broader DeFi ecosystem of the BNB Chain.
BNB’s price has been under duress, trading at $215.8, marking a 38% decline since mid-April, according to CoinGecko. In contrast, Venus’ XVS token witnessed a 6.5% surge over the past 24 hours, reflecting the volatile nature of the crypto market.
The saga began in October 2022 when the hacker exploited the BNB Chain bridge, generating 2 million BNB tokens.
Subsequently, the perpetrator utilized 900,000 BNB as collateral to borrow a staggering $150 million worth of stablecoins on the Venus protocol.
In the wake of the recent market movement, Venus took measures to ensure the stability of the BNB Bridge exploiter account. Utilizing whitelisted liquidation, BNB Chain guaranteed the account’s health, preventing any shortfall or additional impact on the BNB ecosystem.
This incident underscores the intricate balance between centralization and decentralization within different smart contract networks.
BNB Chain’s proactive intervention showcased a willingness to avert potential damage through centralized measures.
This contrasts with scenarios where more decentralized networks may face increased challenges in addressing rapid market shifts.
Michael Egorov, the founder of Curve Finance, navigated similar challenges in the Ethereum-based ecosystem. Faced with the risk of nine-figure liquidations on-chain, Egorov worked to alleviate debts tied to Ethereum-based lending protocols due to concerns about CRV’s price fluctuations.