Aave’s exposure to Curve hack, explained

If CRV dips below 65%, it will be at risk of liquidation

article-image

Akif CUBUK/Shutterstock modified by Blockworks

share

Decentralized exchange Curve Finance saw exploits of over $70 million on Sunday, caused by a Vyper reentrancy lock malfunction. 

There had been a bug in versions 2.15 to 3.0 of the Vyper coding language, curvecap.lens explained in an X space. 

Vyper code incorporates built-in reentrancy protection, which prevented developers and auditors from noticing potential issues during external inspections.

Following the exploit, the price of CRV, Curve’s native token, dipped drastically, from roughly $0.73 to $0.62 in just a few hours. 

So what has Aave got to do with all of this?

Founder of Curve, Michael Egorov, has a loan of roughly $63 million in USDT using CRV as collateral on Aave v2. 

If the price of CRV dips below 65% based on risk parameters set by Aave (to roughly $0.32), it will be at risk of liquidation. At the time of writing, CRV price is currently situated at $0.55.

When liquidations do occur, collateral deposited by the borrower will be sold for the borrowed asset. In this case, this means that CRV will be sold for USDT, cascading into bad debt.

This concern has previously been flagged by Gauntlet, who had suggested freezing CRV and setting CRV’s loan to value (LTV) to zero on Aave v2.

“The amount of CRV concentrated on Aave, relative to the circulating supply of CRV, is already high. Given the limitations of V2 mechanisms, including the possibility of circumventing an LTV of 0, the only way to truly prevent more risk of this position is to prevent borrowing of all assets on V2,” Gauntlet wrote

This proposal ultimately did not pass

In light of the current situation, Marc Zeller, the founder of Aave-Chan Initiative, a delegate platform that contributes to AAVE governance, told Blockworks that Aave governance is aware of the CRV situation.

“The risks associated with it are gradually reduced in a stream of AIPs for the past months,” Zeller said. “Governance [is managing] this and [the] situation gradually is getting better.”

To prevent risks like this from occurring Zeller notes that users should migrate to Aave v3. 

“The old Aave [v2] doesn’t have caps and that is how this situation exists. V3 does and makes this kind of scenario impossible there,” he said.

Correction Aug. 15 2023 at 3:53 am ET: Egorov’s Aave loan at time of publication was $63 million not $70 million.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Brooklyn, NY

SUN - MON, JUN. 22 - 23, 2025

🚀 Build What’s Next — Permissionless IV Hackathon Join us June 22–23 in Brooklyn for the Permissionless IV Hackathon — a 36-hour sprint hosted by Cracked Labs and Blockworks where top builders turn ideas into real products. Come to launch, not just […]

recent research

Research Report Templates (10).png

Research

Kamino has evolved into a full-stack asset scaling suite with V2: unlocking new markets, improving capital efficiency, and catering to various risk profiles. We believe it is best positioned to become the credit backbone of Solana as the ecosystem matures. Simply put, KMNO remains our highest-conviction bet in the Solana ecosystem. This report lays out our thesis.

article-image

Bybit’s Byreal, Binance Alpha and Coinbase’s DEX integrations

article-image

This isn’t the worst hack to ever hit Mt. Gox, but it could be the most entertaining

article-image

Crossover’s CEO discusses institutional interest and how over-the-counter (OTC) trading has picked up in crypto

article-image

Sponsored

This collaboration signifies a major leap forward in expanding the reach and utility of Web3 gaming within the vibrant Asian market

article-image

Asymmetric information is threatening crypto the same way it once threatened equities. Disclosure might be the fix.

article-image

Rate cuts drift into Q4 limbo as markets pretend everything’s fine