Aave’s exposure to Curve hack, explained

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


Akif CUBUK/Shutterstock modified by Blockworks


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.

Don’t miss the next big story – join our free daily newsletter.


Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research report - cover graphics (1).jpg


In this report, we dive into crypto private market data to gather insights on where the future of the industry is headed. Despite a notable downturn in private raises, capital continues to infuse promising projects that aim to transform payments, banking, consumer experiences, community, and more, with 2023 being the fourth-largest year for crypto venture capital.


The results mark “a major positive inflection point,” one analyst says, as the exchange carries net income momentum into a crypto rally


While the slate of 10 US spot bitcoin funds have tallied $4.6 billion of net inflows thus far, half of the field is lagging the leaders


Trading volumes totalled $154 billion in Q4, including $125 billion in institutional volume


DeFi on Bitcoin is all the rage right now and Stacks is positioned to benefit


The Boston Globe reports that lawyer John Deaton is weighing a possible bid


Ethereum’s Dencun upgrade will enable Uniswap v4 to optimize smart contracts for complex functionality