On April 11, users of Pac Finance’s decentralized finance (DeFi) app reportedly experienced $24 million in liquidations due to a sudden modification of parameters made by a developer wallet, as per various social media postsings and the official Discord channel. The Discord moderator stated that the team has been informed about the issue. Nevertheless, no formal announcement concerning this incident has been released by the team at the time of writing.
At Pac Finance, a crypto lending application operating on Blast network, users can deposit their cryptocurrencies to generate interest through lending. Borrowers are limited to obtaining loans that represent a specific percentage of their collateral as a safety measure for repayment. This percentage is referred to as the “loan-to-value ratio” (LTV). The LTV can be adjusted by the development team, but such adjustments typically occur following an official announcement.
Based on Blast network’s blockchain information, a developer wallet initiated a call to Pac Finance’s PoolConfigurator-Proxy contract at 1:06 am UTC on April 11. This action set the Loan-to-Value (LTV) ratio for Renzo Restaked Ether (ezETH) to 60%.
Based on the explanation from Roffet.eth, a well-known smart contract developer, this adjustment to the parameter led to the forced closure of numerous ezETH lending positions. This was due to these debtors failing to abide by the collateral regulations set by the protocol. In his opinion, this unexpected modification was deemed “arbitrary,” as there had reportedly been no prior notice given before it was implemented.
Will Sheepar, founder of Parsec Finance, expressed his disapproval of the recent alteration, stating it seemed to have been implemented “suddenly and unexpectedly.” He approximated that borrowers suffered a loss of around $24 million in collateral when their assets were compulsorily sold to repay their loans as a result of this modification.
Users of Pac Finance flocked to the platform’s Discord server to voice their concerns and seek clarification after a series of liquidations. The Discord moderator, Bountydreams, reported attempting to reach out to the team for an explanation, but by 7:55 pm, they had yet to receive a reply.
Liquidation of massive cryptocurrency or cash loans is a common issue for traders who employ leverage. This typically occurs due to unexpected price fluctuations in cryptocurrencies rather than protocol modifications. On April 2, approximately $165 million worth of Bitcoin positions were liquidated as a result of a sudden flash crash. Likewise, on April 9, an additional $110 million was liquidated when the price of Bitcoin suddenly surged upwards.
This is a developing story, and further information will be added as it becomes available.
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2024-04-12 00:25