As Curve’s crisis fades into the rearview, what’s next for DeFi?

a year ago

Here’s a funny statistic: According to Rekt’s global exploit loss leaderboard, even before a coalition of whitehats and security experts managed to claw back the majority of stolen funds, the Curve hack just barely cracked the top 30 all-time.

For most observers, the Curve exploit no doubt felt a touch more dire in the thick of it. For one, Curve was a famously resilient protocol and a systemically important source of liquidity for stablecoins. At least twice on Sunday, July 30, the team said that the effects of the hack were mitigated, only for another exploit to drain millions — it’s enough to set anyone skittish.

The damage to the protocol may have been secondary to the hand-wringing about Curve founder Michael Egorov’s various DeFi positions.

Loans worth upwards of $110 million prior to the hack suddenly looked vulnerable, as they were backed by Curve’s beaten-down CRV governance and rewards token. A news cycle unto itself was devoted to analyzing the potential fallout of liquidation, with Aave in particular looking like a possible victim of contagion.

In the end, however, a group of well-capitalized — if not somewhat unlikely — buyers stepped in. They hoovered up CRV in over-the-counter deals and allowed Egorov to rebalance and pay down huge swaths of his obligations. At the time of writing, his primary address counts just over $50 million in stablecoin debt — with an additional $18 million in spot CRV available for deployment.

I previously weighed in on how we might conceptualize the legacy of this hack over time in an edition of Blockworks’ Empire pod. In my view, we’re going to remember this one more for its influence in terms of how lending markets handle risk than we do for the dollar amount lost.

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