Liquidation of $30M BNB Position Linked to $560M Hack Amid Crypto Market Crash

In a dramatic turn of events, a $30 million BNB position linked to the perpetrator of a massive $560 million hack was liquidated on the Venus lending protocol during the crypto market crash on August 17.

This incident sheds light on the complexities of DeFi ecosystems, centralization, and the measures taken to safeguard against market turbulence.

Liquidation Amid Market Turmoil: The BNB Core team took proactive action by manually liquidating the $30 million BNB position on the Venus lending protocol as BNB’s price plummeted below $220.

This decision was in accordance with a governance proposal passed by Venus in November 2022. The manual liquidation was intended to prevent potential on-chain margin call impacts that could destabilize BNB’s price and pose a risk to the broader BNB Chain’s DeFi ecosystem.

Market Performance and CoinGecko Data: Recent market data indicates that BNB’s price has suffered a 38% decline since mid-April, with the latest trading value at $215.8. On the other hand, Venus’ XVS token experienced a 6.5% increase in the past 24 hours, defying the market downturn.

Background: The Hack and Exploitation: The hacker behind the $560 million breach exploited the BNB Chain bridge in October 2022, minting an astounding 2 million BNB tokens.

Subsequently, 900,000 BNB tokens were utilized as collateral to borrow an astonishing $150 million worth of stablecoins on the Venus platform. This exploit shook the DeFi community and raised concerns about security measures.

Venus’ Response and Health of the Network: Following the recent market turbulence, Venus issued a statement affirming the health of the BNB Bridge exploiter account.

The BNB Chain utilized whitelisted liquidation to ensure that there were no resulting shortfalls or adverse impacts on the BNB ecosystem.

Venus’ Prominent Position in DeFi: Venus stands as the second-largest DeFi protocol on the BNB Chain network, boasting a significant total value locked at $600 million. Its influence underscores the interconnectedness of the DeFi landscape and its role in managing crisis situations.

Centralization Trade-offs: This incident highlights the intricate balance between centralization and decentralization in smart contract networks. BNB Chain’s decision to manually intervene in the liquidation process showcased its willingness to mitigate potential damage and maintain stability, even amid market crashes.

Contrast with Ethereum-Based Platforms: Drawing a contrast, Michael Egorov, the founder of Curve Finance, faced a different challenge.

Fearing significant liquidations on-chain due to price drops in CRV, the Ethereum-based lending protocol’s founder swiftly addressed his debts.

He resorted to selling a considerable portion of his CRV holdings through over-the-counter deals, indicating the challenges faced in decentralized environments.