DeFi lending protocol Compound will pause activity for four illiquid cryptocurrencies on its platform.
On Oct. 25, the Compound DAO passed Proposal 131 which called for a pause in supply for ZRX, MKR, BAT and YFI on Compound v3.
The motivation behind this proposal was the Mango Markets exploit earlier this month, in which an attacker drained more than $100 million from the Solana-powered DEX. The exploiter went on to describe the attack as a “highly profitable trading strategy” after he manipulated the price of MNGO by taking advantage of its low liquidity.
While Compound believes a similar attack on its own platform is far less likely given that loans are required to be over-collateralized, the DeFi protocol would prefer to err on the side of caution.
The removal of these was proposed as a risk mitigation step in a forum discussion last week after assessing the tokens’ low liquidity profiles.
“New borrows against these assets are not likely to be large in size in the near term compared to the tail risk they bring to the market,” said Kirk Hutchison, founder of the Volt Protocol, in the forum discussion.
Proposal 131 was passed with 99.9% of voters in favor, including Compound CEO Robert Leshner.
“Even though code is law, he [Mango Markets exploiter] completely violated the expectation of the protocol, the users, the community,” said Robert Leshner on The Chopping Block last week.
“I think one part of him is correct, in that, you know, every protocol has to address the risk parameters that some black hat is gonna try to exploit it. And it’s a great wake up call for every DeFi project on every single blockchain to take this moment as a wake up call,” he added.