Key Takeaways:
- Curve Finance’s LLAMMA mechanism successfully managed liquidations during a hacking attempt, but CRV’s price dropped by over 28%.
- Founder Michael Egorov executed multiple liquidations and transactions with DeFi platforms to manage debt positions amid the incident.
- The LLAMMA mechanism uses multiple liquidation ranges for smoother liquidations but can lead to hard liquidation if loan health declines significantly.
Curve Finance recently experienced a hacking attempt that tested its LLAMMA (Lending-Liquidating Automated Market Maker Algorithm) soft liquidation mechanism.
Despite the successful handling of liquidations, the native CRV token’s price dropped by over 28%.
Curve Finance founder faces liquidation risk amid sharp drop in CRV token price https://t.co/lbbTFG1N9W
— The Block (@TheBlock__) June 13, 2024
During the incident on June 13, Michael Egorov, the founder of Curve Finance, faced significant liquidation pressures due to the falling CRV price.
Egorov managed his debt positions by executing multiple liquidations and making transactions with DeFi platforms like Inverse Finance and Curve.fi.
The LLAMMA mechanism ensures liquidations occur smoothly without resulting in unmanageable debt.
Was not planned, but fascinating how soft liquidations work on https://t.co/bdUCarOsuM. There are docs at https://t.co/zQjPsRK8lQ (same as for crvUSD).
— Michael Egorov (@newmichwill) June 12, 2024
The system showed a fantastic performance. This gave time for liquidators to prepare funds and OTC-liquidate the hacker's… https://t.co/4nG8BIEush
It uses multiple liquidation ranges instead of a single price, continuously adjusting the collateral.
However, positions undergoing soft liquidation can suffer losses, which decrease the loan’s health and may lead to hard liquidation if the health reaches zero.
$CRV price plunges 25% after @CurveFinance founder @newmichwill's multi-million dollar liquidation. CRV hits an all-time low of $0.25.📉
— Moby Media (@mobymedia) June 13, 2024
Full story here↘️https://t.co/gDPsBIvNAB
Despite the mechanism’s effectiveness, the market’s reaction was negative, leading to a sharp decline in CRV’s value.
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