Macauley Peterson

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Michael Egorov is no stranger to token incentive mechanisms. As the founder of <a href="https://blockworks.co/tag/curve">Curve</a>, he pioneered vote-escrow (ve) tokenomics to juice the growth of the stablecoin AMM. But his new protocol, Yield Basis, is built for a different kind of user: “people who want to earn something on mostly Bitcoin,” as Egorov told Blockworks.



At its core, Yield Basis is an attempt to eliminate LP impermanent loss by leveraging liquidity. Egorov explains: “If you leverage liquidity by a factor of two and keep this leverage, then the pricing of liquidity which gives you impermanent loss actually disappears.” The result, he says, is LP positions that behave like spot BTC exposure — with none of the usual downside when prices move violently.



The mechanism builds on Curve’s liquidity pools, but with key upgrades. Egorov has engineered the system to “re-leverage” automatically, keeping the 2x ratio constant. “It’s very important to keep this ratio very, very precise,” he said, noting that “a special AMM will do it for you.”



That precision, he argues, is what distinguishes Yield Basis from <a target="_blank" rel="noreferrer noopener" href="https://blockworks.co/analytics/fluid">Fluid</a>. “From what I understand, [Fluid is] doing it rather manually,” he said. “They’re earning a lot in fees, but they are losing more when this process of moving the range happens.”



The Fluid team <a href="https://x.com/DeFi_Made_Here/status/1914770198806012289">responded</a> that rebalancing is in fact “automated and done by arbitrageurs,” and its upcoming DEX v2 will be permissionless, likely replicating similar features.



Yield Basis is designed to have automated arbitrage-driven rebalancing logic, preserving capital value in BTC terms. “You want your number of bitcoin to smoothly go up rather than ever go down,” Egorov said.



Of course, there are new protocol tokens involved. And the tokenomics design is no less ambitious. LPs must choose: Either earn real BTC-denominated yield from trading fees, or forgo that income in exchange for emissions of the protocol’s first native token, $YB. “We only distribute real revenues to liquidity providers who did not choose to earn YB inflation,” Egorov said.



That dynamic turns YB emissions into something closer to mining than farming. “Every single $YB token has an intrinsic cost of being mined,” <a href="https://x.com/vasily_sumanov/status/1913267626391863370">wrote</a> researcher Vasily Sumanov in a recent X article. “Users efficiently buy $YB from the protocol at a certain price (or bear a certain cost to obtain them).”



The token’s utility follows a familiar Curve model. YB can be locked into veYB to direct emissions and capture BTC yield, launching what some are already calling <a href="https://blockworks.co/news/podcast-understanding-the-curve-wars">Curve Wars</a> 2.0. “When bootstrapping a new project, it’s actually good to have a new token,” Egorov said — and there is expected to be one for each chain deployment with “its own governance on every chain.”



That decision, which is likely to raise some eyebrows, is driven partly by a desire to remove any need for bridging, and partly because “having one token per chain can open good business opportunities to align with local ecosystems in non-ETH chains,” Egorov said.



Despite being a standalone protocol, Egorov insists Curve also stands to benefit. “10% of the fully diluted YB token distribution will go toward Curve,” he said. Plus, Curve’s collateralized stablecoin, crvUSD, is central to the architecture. “These YB tokens can be used to buy votes for crvUSD liquidity…that’s revenues for the DAO if you count vote incentives as revenues.”



The Curve DAO <a href="https://blockworks-research.beehiiv.com/p/ethereum-curve-spending-microscope">directly funds</a> Egorov’s company, Swiss Stake AG. Aave founder Stani Kulechov recently <a href="https://blockworks.co/news/making-sense-of-daos-in-2025">received pushback</a> from Aave token holders about his plans to launch a new protocol under similar terms.



Yield Basis quietly raised $5 million in February, and is not yet live. It will launch first on Ethereum mainnet. When? “Once I’m sure the code is safe and ready,” Egorov said. “I want to see it performing in real life.”



Updated, Apr. 23, 2025 at 7:30 am — Comment from Fluid team. 



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0xResearch Newsletter

Yield Basis wants to be DeFi’s ‘Bitcoin black hole’

The DAO community governing Curve finance is on the verge of approving a 21 million CRV (about $6 million) 1-year funding proposal from Swiss Stake AG, Curve Finance’s lead development team headed by the protocol’s founder Michael Egorov.



Curve proposals require a quorum of 30% of all <a href="https://resources.curve.fi/vecrv/overview/">vote-escrowed CRV</a> (veCRV) to participate, with a majority voting in favor. As of Friday at 2:00 pm ET, the votes cast amount to 28.55% of the total, with nearly 100% in favor.



An initial version of the proposal faced community resistance due to a lack of clarity regarding proposed budget allocations, the management of <a href="https://blockworks.co/tag/crv">CRV</a> tokens and the implementation of protective measures like vesting, tied to project milestones.



Read more: <a href="https://blockworks.co/news/curve-founder-faces-community-pushback-on-funding-proposal">Curve founder faces community pushback on DAO funding proposal</a>



In response to the community’s concerns, Egorov has <a href="https://crvhub.com/governance/ownership/828">updated the proposal</a> with more detailed information. The revised proposal specifies that the requested funds, totaling 21 million CRV, will be allocated to developing key technical features such as scaling supply sinks for <a href="https://blockworks.co/price/crvusd">crvUSD</a> and improving foreign exchange pools.



Rather than a lump sum, tokens will be vested over one year to a smart contract and staked with major liquid locker projects such as <a href="https://blockworks.co/price/sdt">StakeDAO</a>, <a href="https://blockworks.co/news/unlockening-is-cryptos-latest-test">Convex</a> and <a href="https://blockworks.co/tag/yearn-finance">Yearn</a>, with safeguards allowing the Curve DAO to intervene if necessary.



Egorov himself and Swiss Stake staff are not required to abstain from the vote, and they collectively hold up to 15% of the veCRV, according to a spokesperson.



&#8220;There is no internal policy or anything like it for that. However, with typical quorums we have in votes, it wouldn&#8217;t matter. What matters is to not get voting power related to the team to be over, say, 20% in total,” the spokesperson told Blockworks citing the <a href="https://blockworks.co/tag/curve">Curve Finance</a> team.&nbsp;



It won’t be known how much veCRV from Egorov or other members of Swiss Stake AG voted in favor of the proposal until the end of the voting period, they said.



Since the start of 2024 out of 190 votes passed, 138 of those (about 73%) were passed with 100% approval.



Per the revised proposal, Swiss Stake AG commits to producing biannual reports detailing the use of funds and the progress of ongoing initiatives. Additionally, the company plans to improve the user interface and governance site. All related code will be open-sourced.



According to Egorov this proposal has been in the works since the end of 2023, before the completion of the team’s initial vesting of 900 million CRV (30% of the total supply) which was distributed over a period of four years, but ended earlier this month.



Much of his personal holdings of CRV were used as collateral in DeFi protocols backing stablecoins loans and <a href="https://blockworks.co/newsletter/research/issue/post_8546eff5-24f4-4213-be5e-08f67c755132">liquidated in June</a> as the price of CRV plunged to an all-time low, following an exploit of UwU lend and a cascade of liquidations.



“That was pretty tough,” Egorov told Blockworks in an interview prior to the current funding request.



“Looking at fundamentals, it did look like having those tokens is much better than having the loans which were taken against them,” he said.



Egorov and his wife purchased a $41 million mansion in Melbourne, Australia, in 2023 <a href="https://www.afr.com/property/residential/melbourne-s-41m-mansion-sale-resets-records-as-top-end-surges-20230524-p5das7">according to</a> the Australian Financial Review.



The Curve founder retains “a bunch” of CRVs locked as veCRV. The new proposal will give him a chance to rebuild his personal supply.



“In fact, I was funding a lot of company operations previously from my personal funds. I have CRVs locked, and system fees I am earning by having those CRVs locked are enough of a motivation for me to work on the project,” Egorov said, shortly before the funding proposal moved to an onchain vote.



Egorov&#8217;s primary motivation &#8220;is to develop and make Curve Finance more secure,&#8221; a spokesperson told Blockworks, and not to earn more CRV.



Update following publication:



The governance proposal passed on September 2 with a final tally of roughly 91% in favor and 64.71% of the veCRV participating, well above the quorum threshold.



Updated, September 2, 2024 at 9:38 am ET with additional context.



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Curve

Curve governance votes on $6M team funding proposal

Michael Egorov, the founder of Curve Finance, introduced a governance proposal on Monday requesting substantial funding to support ongoing development through his company Swiss Stake AG.



The proposal seeks 21 million CRV tokens, valued around $6.3 million at current market rates, to cover operational costs over a one-year period. The primary focus of the funding is to scale Curve’s stablecoin, crvUSD, enhance foreign exchange markets, and develop leverage products based on crvUSD.



<a href="https://blockworks.co/tag/michael-egorov">Egorov</a> emphasized the necessity of continuous development to avoid stagnation, particularly highlighting the importance of security audits, which he notes consume a significant portion of the budget. However, <a href="https://gov.curve.fi/t/funding-proposal-for-swiss-stake-ag-the-company-building-curve/10204/22">the proposal</a> has sparked a heated debate within the Curve community, with many members expressing serious concerns.



A recurring criticism is the proposal&#8217;s vagueness. Community members, commenting under pseudonyms such as Intrepid_llama, argue that the proposal fails to provide a clear roadmap, specific allocation of funds, or performance metrics.



Read more: <a href="https://blockworks.co/news/vc-firms-accuse-curve-founder">Venture firms accuse Curve founder of elaborate fraud</a>



The absence of detailed plans on how the funds will be used has led to accusations of insufficient accountability, with some members refusing to support the proposal unless it is significantly revised to include these details.



&#8220;As written, this proposal hands over 21 million CRV&#8230; with no control on how it is spent — just an obligation to produce summarized bi-annual reports after the fact. This is unacceptable,&#8221;&nbsp; Intrepid_llama wrote.



Egorov, in response, said his lawyers advised him to refrain from offering specifics. Despite this, he has expressed willingness to push back against these constraints to provide more clarity.



That explanation has not satisfied the critics, who point out that other DeFi projects — such as <a href="https://blockworks.co/tag/aave">Aave</a> — are more transparent in their funding requests.



While there’s a general appreciation for the work that Egorov’s team has done, the post also raises the “spectacular failures” such as the <a href="https://blockworks.co/newsletter/research/issue/post_8546eff5-24f4-4213-be5e-08f67c755132">mass liquidation</a> of Egorov’s personal CRV in June.



Community member Crvnon pointed to “an inability to work with large shareholders, and capital and reputational destruction from the liquidation event inflicted on every team and protocol that calls Curve home,” calling these “wholly avoidable and self-inflicted.”



Egorov told Blockworks in an interview prior to the governance proposal that he would rather have the CRV tokens than the liquidated loans he took out against them.



“It was not easy but I&#8217;m glad that a bunch of CRVs locked to make the fees from the system,” he said. “There are plenty of things planned for Curve and they are not stopping at all — I&#8217;m probably even more motivated to bring those to reality as quickly as possible.”



Other community members are concerned about the long-term sustainability of the proposal, particularly given its significant draw — approximately 50% — on the community fund. They argue that without clear targets for growth and revenue generation, the ecosystem’s sustainability is at risk.



Several members, including Cryptoinvest and boz_m, stress the importance of operational clarity. They advocate for breaking down the funding request into quarterly segments with attached deliverables and suggest pricing in <a href="https://blockworks.co/price/crvusd">crvUSD</a>, instead of the more volatile CRV tokens.



Curve Finance saw its fifth annual reduction in CRV token issuance on Aug. 13, which brought the inflation rate down to 6%, according to a Curve spokesperson.



“The amount of CRV locked as veCRV over the past two months has outpaced the total expected inflation for the next year, and the increasing number of tokens being locked means that Curve’s participants intend to stay with the platform for the long haul, increasingly committed to its development,” according to a statement shared with Blockworks.



Using crvUSD would better protect the community fund from market fluctuations and provide clearer accountability, the community members argue.&nbsp;



Boz_M called for “specific performance metrics or milestones [that] would allow investors to track progress and evaluate the success of the funded initiatives.&#8221;



Egorov has acknowledged the criticisms and expressed a willingness to adjust the proposal, particularly regarding the inclusion of more detailed information on how the funds would be spent.



The proposal is expected to be revised based on feedback received before moving to a week-long on-chain vote.



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Curve founder faces community pushback on DAO funding proposal

Andrew Thurman

After a week that saw the price of Curve’s CRV token fall 20%, a series of over-the-counter deals originally made to bail out Curve founder Michael Egorov’s lending positions now face scrutiny. 



On July 31, <a href="https://blockworks.co/news/curve-suffers-exploit">Curve suffered a $70 million exploit</a> that sent the price of CRV tumbling from $0.73 to as low as $0.50.



While the majority of the funds were later <a href="https://blockworks.co/news/post-curve-defi-health">recovered or seized by whitehat hackers</a>, one pool in particular —&nbsp;CRV/ETH — remained drained. This pool was an important source of on-chain liquidity for <a href="https://blockworks.co/price/crv">CRV</a>, and without it, lending markets that might need to liquidate CRV collateral on delinquent positions ran the risk of incurring bad debt.&nbsp;



This was not a theoretical risk. At the time of the attack, Egorov held upwards of $110 million in <a href="https://blockworks.co/tag/stablecoins">stablecoin</a> loans from various lending platforms, largely using CRV collateral. As the price fell, many of those positions appeared to be at risk of liquidation.&nbsp;



To save his loans — and potentially prevent cascading liquidations across the DeFi space — Egorov entered into a series of over-the-counter (OTC) deals with over a dozen counterparties, selling large tranches of CRV for stablecoins to pay down his debts. 



Read more: <a href="https://blockworks.co/news/curve-egorov-exit-defi-positions">Curve’s Egorov turns to notable counterparties to bail out his DeFi positions</a>



While the terms of the deal were not formally disclosed, multiple individuals who claimed to have been approached wrote publicly that the tokens were sold for $0.40 per CRV (well below market rate at the time) with a six-month lockup. However, the lockups did not appear to be enforced legally or via smart contract.&nbsp;



In a statement to Blockworks, <a href="https://blockworks.co/tag/michael-egorov">Egorov</a> confirmed that there are no negative effects for buyers who break the handshake agreement, but that he “thinks they would” keep their word regarding the six-month lockups. 



Observers have already noted that some of the parties have transferred their tokens to centralized exchanges — often a sign that they intend to sell.&nbsp;



Andrei Grachev, head of DFW Labs, one of the entities that has transferred their OTC’d tokens to an exchange, denied these accusations on Twitter, claiming that the move was for “trading needs” and not to sell.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Sent 2m <a href="https://twitter.com/search?q=%24CRV&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$CRV</a> on Binance, and, will probably send more. Not for liquidation purposes (it would be dumb to sell it now), but for trading needs. When we’ve done our plan, we will withdraw <a href="https://twitter.com/search?q=%24CRV&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$CRV</a> back to onchain Cheers and enjoy rollercoaster 🎢 <a href="https://t.co/Kdds4DQrP6">pic.twitter.com/Kdds4DQrP6</a>&mdash; Andrei Grachev (@ag_dwf) <a href="https://twitter.com/ag_dwf/status/1693933946910732535?ref_src=twsrc%5Etfw">August 22, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



As Egorov pointed out to Blockworks, other users have indirectly committed to the six-month lockup by vote-escrowing their CRV. Locking tokens in the vote escrow contracts issues veCRV, which allows users to dictate the flow of further CRV rewards to specific liquidity pools.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">0xf51, the largest <a href="https://twitter.com/search?q=%24CRV&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$CRV</a> OTC buyer, has just locked 15,000,000 CRV until February 1st. Is this the largest <a href="https://twitter.com/CurveFinance?ref_src=twsrc%5Etfw">@CurveFinance</a> lock ever? <a href="https://t.co/YkLQ8fVTJd">pic.twitter.com/YkLQ8fVTJd</a>&mdash; Chago0x (@chago0x) <a href="https://twitter.com/chago0x/status/1691369383820488704?ref_src=twsrc%5Etfw">August 15, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Despite the price dip, Egorov’s current positions look <a href="https://debank.com/profile/0x7a16ff8270133f063aab6c9977183d9e72835428">healthy</a>. On Aave, he has a $14.8 million loan secured by $55.8 million in CRV collateral, and across a number of protocols an additional $27 million in debt secured by $68 million in collateral.&nbsp;



CRV is currently trading around $0.45, down 6% on the day.



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CRV down 20% on the week as traders scrutinize OTC deals

Katherine Ross

Binance Labs announced that it will invest $5 million in Curve’s DAO token CRV. Curve will also explore deployment to BNB chain as part of the announcement.&nbsp;



Binance Labs is the venture capital arm of <a href="https://blockworks.co/tag/binance">Binance</a>.&nbsp;



“Curve is the largest stableswap, and as a key protocol in DeFi it has contributed to the steady growth of the space in 2023. Given the recent events that have impacted the protocol, Binance Labs has offered our full support to Curve through our investment and strategic collaboration,” Yi He, head of Binance Labs, said in a statement.



No timeline was given on a possible deployment to BNB chain, however.&nbsp;



Curve founder Michael Egorov <a href="https://www.binance.com/en/blog/ecosystem/binance-labs-invests-$5m-in-curve-dao-token-crv-and-supports-curve-deployment-to-bnb-chain-4372009526169554266">said</a>, “BNB Chain has earned a significant presence in DeFi, and is well positioned to deploy Curve&#8217;s current and future products on its chain.”



Curve suffered a hack of over $70 million at the end of July, with multiple attacks draining various pools including Pendle’s pETH-ETH, Alchemix’s alETH-ETH, and CRV/ETH. A software exploit was at fault for the exploit.



On Aug. 1, Egorov turned to <a href="https://blockworks.co/news/justin-sun-summoned-sec-lawsuit">Tron founder Justin Sun</a> and <a href="https://blockworks.co/news/zachxbt-legal-defense">tech entrepreneur Jeffrey Huang</a> for liquidity, making a <a href="https://blockworks.co/news/curve-egorov-exit-defi-positions">series of over-the-counter</a> (OTC) transactions.&nbsp;



Binance Labs did not immediately return a request for comment asking to clarify if this deal was part of the recent OTC transactions made by Egorov.



Read more: <a href="https://blockworks.co/news/post-curve-defi-health">As Curve’s crisis fades into the rearview, what’s next for DeFi?</a>



Following the attack, Curve Finance offered a hefty bounty — worth roughly $1.85 million — to identify who exploited the protocol.&nbsp;



“If the exploiter chooses to return the funds in full, we will not pursue this further,” the team behind the DeFi protocol said on Aug. 6.



Since then, Curve was able to recoup a large portion of the funds through white hat hackers, according to PeckShield.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true"><a href="https://twitter.com/hashtag/PeckShieldAlert?src=hash&amp;ref_src=twsrc%5Etfw">#PeckShieldAlert</a> A total of ~$73.5M worth of cryptos on <a href="https://twitter.com/hashtag/Ethereum?src=hash&amp;ref_src=twsrc%5Etfw">#Ethereum</a> were stolen in the <a href="https://twitter.com/hashtag/Curve?src=hash&amp;ref_src=twsrc%5Etfw">#Curve</a> Reentrancy exploit. So far, ~73% of them (~$52.3M) have been returned. The remaining ~$19.7M worth of cryptos on <a href="https://twitter.com/hashtag/Ethereum?src=hash&amp;ref_src=twsrc%5Etfw">#Ethereum</a> have not yet been returned by the 1st Curve CRV-ETH exploiter… <a href="https://t.co/hU4v1UATeh">pic.twitter.com/hU4v1UATeh</a>&mdash; PeckShieldAlert (@PeckShieldAlert) <a href="https://twitter.com/PeckShieldAlert/status/1688404426825117697?ref_src=twsrc%5Etfw">August 7, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



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Binance

Binance Labs to make $5M investment in CRV following July hack

To save his DeFi loan positions and prevent a possible liquidation cascade, Curve founder Michael Egorov has turned to some notable sources of liquidity.&nbsp;



Following a series of exploits on multiple Curve Finance decentralized exchange pools on Sunday, the price of Curve’s CRV governance and rewards token has plummeted by as much as 30%, falling from $0.73 on Sunday to $0.503 Monday night before recovering to $0.63 on Tuesday, per Coinmarketcap <a href="https://coinmarketcap.com/currencies/curve-dao-token/">data</a>.&nbsp;&nbsp;



This in turn has placed significant pressure on some of the most closely-watched positions in DeFi. Egorov, a prolific DeFi power user, had upwards of $110 million in outstanding <a href="https://debank.com/profile/0x7a16ff8270133f063aab6c9977183d9e72835428">loans</a> to various DeFi protocols that largely used CRV as collateral. Multiple positions were at <a href="https://twitter.com/soupdefi/status/1685805148197515264">risk</a> of liquidation at roughly $0.35 per <a href="https://blockworks.co/price/crv">CRV</a> token.&nbsp;



Liquidations can often lead to tremendous sell pressure. In the case of Egorov’s CRV position, the liquidations could result in bad debt for multiple projects due to the dearth of CRV liquidity on Ethereum. Curve’s CRV/ETH pool was <a href="https://blockworks.co/news/curve-suffers-exploit">among those hacked on Sunday</a> and previously played a key role in the token’s trading depth.&nbsp;



Aave’s <a href="https://docs.aave.com/aavenomics/safety-module">Safety Module</a> — effectively an insurance backstop for the protocol — uses a $300 million AAVE/ETH Balancer pool as well as staked AAVE as the source of funds in the event of a shortfall event, meaning that the protocol would sell AAVE tokens to cover losses. 



Ultimately, this could lead to precipitous market declines in both <a href="https://blockworks.co/price/aave">AAVE</a> and CRV if Egorov were to be liquidated, which in turn could lead to further liquidations and possible bad debt across platforms that use either token as collateral.&nbsp;



As of Tuesday morning, however, on-chain evidence points to Egorov executing a series of over-the-counter (OTC) transactions with perhaps unlikely parties. In doing so, Egorov appears to have scrounged together a cache of stablecoins to pay down portions of his debt and secure his positions — at least for now.&nbsp;&nbsp;



<h2 class="wp-block-heading">Meet the counterparties</h2>



According to Nansen <a href="https://twitter.com/sandraaleow/status/1686331246593359872">analyst</a> Sandra Leow, over a period of hours, Egorov sold 54.5 million CRV tokens to nearly a dozen OTC buyers at a rate of $0.40 per token — well below market price.&nbsp;



In many ways the buyers resemble a who’s-who of controversial crypto personalities.&nbsp;



Major buyers include Tron founder Justin Sun, <a href="https://blockworks.co/news/justin-sun-summoned-sec-lawsuit">who was recently sued by the US Securities and Exchange Commission</a>; tech entrepreneur Jeffrey Huang, <a href="https://blockworks.co/news/zachxbt-legal-defense">who was accused of embezzling 22,000 ETH</a>; and DWF Labs, a company critics say <a href="https://blockworks.co/news/cryptogpt-headlines-dyor">blurs the lines between investing and market making</a>.&nbsp;



Convicted felon Michael Patryn, <a href="https://blockworks.co/news/cronje-says-defi-saved-fantom-we-are-cash-flow-positive">working under the moniker 0xSifu</a>, implied on <a href="https://twitter.com/0xSifu/status/1686294119167967232">Twitter</a> that he was also invited to participate as well, and that the tokens have a six-month lockup. The Block additionally <a href="https://www.theblock.co/post/242516/curve-founder-michael-egorov-sells-more-crv-to-dcfgod-and-others">reports</a> that the deal comes with an option for buyers to sell if the price of CRV exceeds $0.80. It is unclear if these terms are enforced contractually, with a smart contract, or simply through handshake agreements.&nbsp;



In a <a href="https://twitter.com/EvgenyGaevoy/status/1686348479625334785">tweet</a>, prolific market maker and OTC desk Wintermute founder Evgeny Gaevoy said that they had not onboarded Egorov, apparently in an effort to distance his firm from the list of “questionable” buyers.&nbsp;



Nonetheless, even with the hodgepodge collection of counterparties, Egorov has managed to pull together enough to pay down over $17 million in stablecoin <a href="https://debank.com/profile/0x7a16ff8270133f063aab6c9977183d9e72835428/history">loans</a> over the past 12 hours, significantly improving the health of his positions across multiple protocols.&nbsp;



Egorov declined to comment when reached by Blockworks, citing the need to reconcile internal bookkeeping.



Updated Aug. 16, 2023 at 5:57 pm ET: Corrected the amount held in Aave’s Safety module.



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Curve’s Egorov turns to notable counterparties to bail out his DeFi positions

Over $70 million in various digital assets have been hacked in a series of attacks on the Curve Finance decentralized exchange on Sunday.&nbsp;



The attacks began at roughly 9:30 am ET, beginning with an exploit of JPEG’d’s pETH-ETH liquidity pool for over $11 million, although that may have been <a href="https://twitter.com/DecurityHQ/status/1685646377198505985">frontrun</a> by an <a href="https://twitter.com/DecurityHQ/status/1685646377198505985" target="_blank" rel="noreferrer noopener">MEV searcher</a>. 



Four other attacks — potentially all launched by different <a href="https://app.cielo.finance/feed/preview/3971-Vyper-Reentrancy-Hackers?minUSD=1000">actors</a> — also drained Alchemix’s alETH-ETH pool, the CRV/ETH pool twice, Pendle’s pETH-ETH pool, and Metronome’s msETH-ETH pool, for a total of over $70 million, per security expert <a href="https://twitter.com/tayvano_/status/1685789453556846592/photo/1" target="_blank" rel="noreferrer noopener">analysis</a>. Some of the hacks were reportedly executed by whitehat hackers, meaning that the total amount lost could be closer to $50 million. 



In a statement on the Curve Discord, team representative “mimaklas” wrote at roughly 4:30 pm ET that &#8220;all affected pools have been drained or white hacked. All remaining pools are safe and unaffected by the bug.&#8221; A Curve representative declined to comment.&nbsp;



Despite these public statements, the attacks may still be ongoing. Two hours after mimaklas’ message, another exploit of the CRV-ETH pool drained an <a href="https://etherscan.io/tx/0xcd99fadd7e28a42a063e07d9d86f67c88e10a7afe5921bd28cd1124924ae2052" target="_blank" rel="noreferrer noopener">additional</a> $5.2 million. 



With $3 billion in liquidity, Curve is comfortably the second-largest and most structurally significant DEX in DeFi, and carries particular importance for stablecoin swap markets — which were not impacted. Curve’s <a href="https://blockworks.co/price/crv" target="_blank" rel="noreferrer noopener">CRV</a> governance and rewards token is down 13.4% to $0.64 after falling as low as $0.58 earlier in the day.  



<h2 class="wp-block-heading">0-day bug</h2>



According to Dr. Laurence Day, the founder of Wildcat Finance and a frequent presenter on smart contract exploits, the thefts were enabled by a zero-day vulnerability in particular versions of the compiler for Vyper, the programming language Curve used for multiple contracts.&nbsp;



The vulnerability is rooted in an assumption regarding “reentrancy” preventions that failed to work as intended. Reentrancy attacks are <a href="https://blockworks.co/news/the-nine-largest-crypto-hacks-in-2022">a common exploit vector</a>.



In the hours since the vulnerability came to light, there has been some amount of finger-pointing between development teams. In a since-deleted tweet, the official Curve Twitter account seemed to blame JPEG’d developers for the exploit. JPEG’d’s team in turn <a href="https://twitter.com/JPEGd_69/status/1685700962621464576" target="_blank" rel="noreferrer noopener">defended</a> themselves.



Curve is also an important <a href="https://gov.curve.fi/t/proposal-to-fund-vyper-development-via-a-new-fundraising-gauge/2726" target="_blank" rel="noreferrer noopener">supporter</a> of the Vyper team, having funded its ongoing development in the past, and Curve team members are actively involved in the maintenance of the Vyper codebase. 



Day cautioned against blaming any one team for the exploit.&nbsp;



“Compilers come pre-packed with a whole host of behavioural assumptions that the vast majority of us simply take for granted because we assume that people smarter than us have done the leg-work closer to assembly,” he wrote. “It&#8217;s very easy to point fingers and call out failures to verify these things.”



<h2 class="wp-block-heading">Alchemix halts contracts</h2>



Among the hardest-hit protocols in the attack, Alchemix has paused a number of contracts to prevent the exploiter from swapping alETH for native ETH, including a bridge to Optimism where the AMM Velodrome has $4.4 million in liquidity in an alETH pool, and the “transmuter” contract, which exchanges alETH for ETH 1-to-1.



Alchemix is designed to give users an advance on their future yield, and uses a synthetic ether derivative, alETH, backed by ether in the process.&nbsp;



Nonetheless, in a <a href="https://twitter.com/AlchemixFi/status/1685737642565173248" target="_blank" rel="noreferrer noopener">tweet</a> the Alchemix development team reports that an exploiter managed to take 5,000 ETH from the alETH-ETH pool, possibly leaving the alETH asset partially unbacked. The extent of the damage is unclear; two attacks on the alETH drained over $30 million, but one may have been a whitehat operation. 



Additionally, one <a href="https://debank.com/profile/0xb8b92767f681979fc1c1af75014adb51e4e4958b" target="_blank" rel="noreferrer noopener">user</a> who appears to be unassociated with the initial exploits took advantage of the exploit to swap 5 ETH for 1200 alETH, which they subsequently transferred to a secondary address prior to <a href="https://debank.com/profile/0x60ee0c8bb493b79286a54997322904f74fba3736/history" target="_blank" rel="noreferrer noopener">selling</a>.



alETH is currently trading for $1,476 relative to native ETH at $1,887, meaning the market is assuming a 22% lack of backing. alETH has $68 million in total market capitalization per Coingecko, with $38 million on Ethereum mainnet alone.



Alchemix’s governance token <a href="https://blockworks.co/price/alcx" target="_blank" rel="noreferrer noopener">ALCX</a> fell about 7% after the exploit.



<h2 class="wp-block-heading">Possible contagion</h2>



Aside from the economic damage from the attacks themselves — the pools that were exploited were significantly larger in dollar terms at the time of attack than what the exploiters actually managed to swipe — many observers are worrying over the potential ripple effects.&nbsp;



Of particular interest is Curve Finance founder Michael Egorov’s $60 million Aave V2 loan. The loan is backed primarily with CRV tokens far in excess of what the protocol could easily liquidate, which <a href="https://blockworks.co/news/aave-curve-bad-debt">could potentially result in bad debt</a>.&nbsp;



The size of Egorov’s position is such that it has perhaps <a href="https://blockworks.co/news/curve-stablecoin-crv-loan">previously been the target of attack</a>.&nbsp;



After Egorov’s account added collateral to the protocol and paid down nearly $4 million in debt, the position is currently stable.&nbsp;



<h2 class="wp-block-heading">Potential recovery</h2>



A portion of the hacked funds not seized by whitehats have also already proved to be recoverable.&nbsp;



Three of the five exploits were frontrun by MEV searchers, including the <a href="https://etherscan.io/tx/0xa84aa065ce61dbb1eb50ab6ae67fc31a9da50dd2c74eefd561661bfce2f1620c" target="_blank" rel="noreferrer noopener">attack</a> on the pETH-ETH pool, the msETH-ETH pool, and the second attack on the CRV-ETH pool. 



In the case of the latter two, the exploits were frontrun by prolific MEV account <a href="https://etherscan.io/address/0xc0ffeebabe5d496b2dde509f9fa189c25cf29671" target="_blank" rel="noreferrer noopener">coffeebabe.eth</a>. This address previously <a href="https://etherscan.io/tx/0x7c68304cd55a36ee61fb4ca1f10fca5d2a0d6bf0103f28d61345fb33c6c8c61c" target="_blank" rel="noreferrer noopener">attempted</a> to communicate with Sushi to return funds after frontrunning another exploit months ago. 



Their address remained active throughout the ordeal, executing trades on popular memecoins in addition to frontrunning the attacks, implying that the frontruns might have occurred autonomously by the account without active knowledge on the part of the account owner.&nbsp;



Curve <a href="https://etherscan.io/tx/0x65670d8e4f08d56971d476b0c68ca745b0749ec7f79f9b79d993ef47cc91b9c6">communicated</a> on-chain with Coffeebabe.eth who expressed intent to move exploited funds to cold storage, as well as their wish to return funds to affected parties.


<div class="wp-block-image">
<figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1956" height="470" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Screenshot-2023-07-31.jpg?w=1024&amp;h=1024" alt="" class="wp-image-63333" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Screenshot-2023-07-31.jpg?w=1956 1956w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Screenshot-2023-07-31.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Screenshot-2023-07-31.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Screenshot-2023-07-31.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Screenshot-2023-07-31.jpg?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Screenshot-2023-07-31.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Screenshot-2023-07-31.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Screenshot-2023-07-31.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Screenshot-2023-07-31.jpg?w=80 80w" sizes="auto, (max-width: 1956px) 100vw, 1956px" /><figcaption class="wp-element-caption">Message embedded in on-chain transaction</figcaption></figure></div>


As of roughly 8:00 pm ET coffeebabe.eth <a href="https://etherscan.io/tx/0xb76754124fdde090f25129105ed2907e3c62e0db87ecb8ffcefcb1dede0954fd" target="_blank" rel="noreferrer noopener">returned</a> the funds from the second CRV/ETH pool exploit.



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Curve suffers $70M exploit, but damage contained

Shalini Nagarajan

ParaFi Digital Opportunities, Framework Ventures, and 1kx allege that <a href="https://blockworks.co/tag/curve" target="_blank" rel="noreferrer noopener">Curve</a> founder Michael Egorov carried out an elaborate fraudulent scheme that spanned six months, deceiving them in multiple ways.



Egorov purportedly misled the three venture capitalists starting in 2020 by making false promises of granting them a stake in Curve.&nbsp;



He is said to have used their network and reputation to gain trust and legitimize Curve, according to their most recent <a href="https://webapps.sftc.org/ci/CaseInfo.dll?SessionID=1F4572B39AD289AEBB9F14C065325F8203E47EB8&amp;URL=https%3A%2F%2Fimgquery.sftc.org%2FSha1_newApp%2Fmainpage.aspx%3FWeb_Server%3Dimgquery.sftc.org%26MINDS_Server%3Dhoj-imx-01%26Category%3DC%26DocID%3D08533304%26Timestamp%3D20230609013525%26Digest%3D05da02677bf2046d8a4610a17a67437b96563648" target="_blank" rel="noreferrer noopener">complaint</a> filed in San Francisco in April. The litigation, first <a href="https://www.dlnews.com/articles/people-culture/vcs-parafi-framework-1kx-sue-curve-founder-michael-egorov/" target="_blank" rel="noreferrer noopener">reported</a> by DL News, was originally filed in October.



As things unfolded, Egorov supposedly stole the plaintiffs&#8217; trade secrets, which included valuable information like industry contacts, investors and investment know-how for Curve.&nbsp;



Curve Finance is a platform meant for exchanging tokens with low fees by using pools of similar assets. Liquidity providers to the platform are rewarded with the protocols native token <a href="https://blockworks.co/price/crv" target="_blank" rel="noreferrer noopener">CRV</a> and trading fees.



Egorov is accused of fraudulently luring the plaintiffs to invest in his company. He then allegedly used their money to boost the value of Curve, denied them their promised shares and fled to Switzerland, renouncing his US residency. All this was done to keep the profits for himself, leaving the plaintiffs out in the cold, they claim.



The plaintiffs’ claimed that Egorov justified “significantly shifting the power [to govern Curve] in his favor.” Instead of letting go of his power in the Curve DAO, he sold some CRV tokens to enrich himself while still keeping significant control, they added.



“Because he deposited plaintiffs’ funds into Curve’s liquidity pools, Egorov has received CRV tokens and fees as an incentive for providing liquidity,” attorneys for the VCs said.



Blockworks has reached out to ParaFi, Framework Ventures, 1kx and Egorov for comment.



<h2 class="wp-block-heading">Egorov seeks Swiss resolution for lawsuit</h2>



According to <a href="https://webapps.sftc.org/ci/CaseInfo.dll?SessionID=1F4572B39AD289AEBB9F14C065325F8203E47EB8&amp;URL=https%3A%2F%2Fimgquery.sftc.org%2FSha1_newApp%2Fmainpage.aspx%3FWeb_Server%3Dimgquery.sftc.org%26MINDS_Server%3Dhoj-imx-01%26Category%3DC%26DocID%3D08575322%26Timestamp%3D20230609020055%26Digest%3D21fc360c443dd4f9b50e8af253e5fe25bc485782">court documents</a> filed on May 22, Egorov&#8217;s attorneys claim that the lawsuit filed in San Francisco is a response to ongoing litigation in Switzerland that began three years ago. They argue that Egorov&#8217;s company, Swiss Stake (Curve’s license holder), had the right to terminate that litigation.



Egorov is now requesting to either postpone or dismiss the lawsuit filed by the plaintiffs, arguing that the case should be handled in Switzerland, as the parties contractually agreed to resolve it there.



“To justify their blatant forum shopping, plaintiffs concocted a new and compelling story painting Egorov as an evil villain who duped three naïve VC firms into giving up ‘trade secrets’ (such as the names of widely known investors) and $1M in invested funds (that Swiss Stake promptly offered to return),” Egorov’s lawyers said in the filing.



“This tale of woe — which, in three years of Swiss litigation, Plaintiffs somehow never mentioned — is fiction,” they added.



They further claimed that Egorov established Swiss Stake in 2019 in Switzerland, as the country is known for being a leading hub for blockchain tech. And during their negotiations, the plaintiffs desired to invest in Swiss Stake and engaged their own Swiss legal representation to draft and finalize an investment agreement with Egorov, they said.



Swiss Stake ultimately decided to end the investment agreement involving the plaintiffs and started refunding the funds that investors had initially paid, according to them.



While other investors allegedly accepted the refunds, the plaintiffs refused them and instead filed a lawsuit in Zug against Egorov and Swiss Stake in August 2020. They claimed breach of contract and specifically referred to the Swiss forum selection clause.



A hearing on the matter is scheduled for July 19.



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Venture firms accuse Curve founder of elaborate fraud

Casey Wagner

<div id="highlights-block_62d9c75ee816f" class="highlights">
 <ul>
 <li>Curve CEO Michael Egorov said the company is looking to launch its own stablecoin</li>
 <li>Overcollateralized stablecoins have reserves of cryptocurrency tokens or other assets that exceed the number of stablecoins issued, providing, in theory, a buffer against price fluctuations</li>
 </ul>
 
</div>



Exchange liquidity pool Curve is looking to launch its first native stablecoin, joining a number of institutional market players vying to seize market share following the recent, sudden and spectacular blow-up of <a href="https://cms.blockworks.co/tag/Terra/">Terra</a>’s UST stablecoin.&nbsp;



The firm’s chief executive, Michael Egorov, in a <a href="https://www.zipeventapp.com/e/REDEFINE-TOMORROW-2022" target="_blank" rel="noreferrer noopener">virtual appearance Thursday</a> said the stablecoin is slated to be overcollateralized. <a href="https://cms.blockworks.co/tag/UST/" target="_blank" rel="noreferrer noopener">TerraUSD</a> — the implosion of which sent digital-asset markets spiraling to the extent many a trader has yet to fully recover — has come under fire, in part, for not maintaining sufficient collateral to hold its one-to-one peg to the US dollar. 



“That’s all I can say for now,” Egorov said, without specifying a launch date.



Overcollateralized stablecoins have reserves of cryptocurrency tokens or other assets that exceed the number of stablecoins issued, providing, in theory, a buffer against price fluctuations. It’s a similar setup to bitcoin-denominated loans, which most always require the debtor to pony up far more of the cryptocurrency than, in theory, is needed to back the line of credit in question.



Egorov did not elaborate on specific assets set to serve as reserves for the new product. Stablecoins are typically backed by the dollar, the euro or other liquid and mainstream fiat currencies. Other stablecoins, including <a href="https://cms.blockworks.co/tag/tether/">Tether</a>, have faced scrutiny over a lack of transparency and the prospect of investing customer stablecoin funds in relatively illiquid assets.&nbsp;



The planned launch comes as regulators worldwide — perhaps most notably, US Treasury Secretary <a href="https://cms.blockworks.co/tag/janet-yellen/" target="_blank" rel="noreferrer noopener">Janet Yellen</a>, who has <a href="https://cms.blockworks.co/yellen-ust-collapse-could-have-been-avoided-with-rules-for-stablecoin-issuers/" target="_blank" rel="noreferrer noopener">called for stablecoins to be strictly overseen</a> in a manner akin to FDIC-insured banks — amp up processes for stablecoin rulemaking in the aftermath of TerraUSD’s collapse. 



“UST was collateralized by LUNA, which ultimately depends on the success of UST,” Egorov said. “That exposed UST to the death spiral.”&nbsp;



The International Organization of Securities Commissions (IOSCO) and the Bank for International Settlements’ Committee on Payments and Market Infrastructures (CPMI) earlier this month issued their, for now, <a href="https://cms.blockworks.co/stablecoin-regulation-ramps-up-across-the-globe-with-new-bis-guidance/" target="_blank" rel="noreferrer noopener">final guidance</a> on best stablecoin practices. 



“The recent market disruptions, while costly for many, were not systemic events,” Jon Cunliffe, chair of the CPMI and deputy governor for financial stability at the Bank of England, said in a <a href="https://www.bis.org/press/p220713.htm" target="_blank" rel="noreferrer noopener">statement</a>, presumably referring to UST’s depeg in May.



If a stablecoin serves as a mechanism for transferring monetary value — and is deemed “systemically important” to financial markets — it must, in the BIS’ view, abide by a specific set of international standards put in place in the wake of the global financial crisis of 2008.



Regulators in the US say they’re especially concerned when it comes to transparency and guidelines around stablecoin reserves. ​​“If you just look at the events in April and May, basically the question everybody asked was ‘What are these stablecoins? Are they really stable? What is backing it?,’” Wolfgang Bardorf, senior vice president and group treasurer of Checkout.com, said during a recent Blockworks <a href="https://cms.blockworks.co/webinars/will-stablecoins-transform-the-business-of-banking/?source=twitter" target="_blank" rel="noreferrer noopener">webinar</a>.



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