Michael Egorov, the founder of Curve, has ardently assured the community of his unwavering dedication to fortifying the Curve platform in the aftermath of a hacking incident. Egorov declared that he has successfully eradicated the $10 million in adverse debt that stemmed from soft liquidations instigated by the hack on June 13.

In a social media communiqué, Egorov elucidated, “The magnitude of my positions was excessively substantial for the markets to absorb, resulting in $10M of detrimental debt,” before asserting that 93% of the debt had already been remediated.

The Breach

The June 13 breach precipitated soft liquidations of Egorov’s positions due to a transient yet precipitous surge in borrowing costs. At the zenith of the turmoil, Egorov confronted $140 million in liquidations, correlating with $95 million in stablecoin debt and a $60 million annualized fee to maintain his positions.

More notably, Curve’s native token, CRV, experienced a precipitous descent, plunging by 28% amid the fiasco. In response, Egorov proposed incinerating 10% of CRV tokens, worth $37 million, to stabilize the token’s value and incentivized voters with heightened APY.

This crisis has rekindled apprehensions regarding the jeopardy posed by Egorov’s debt positions to the stability of the Curve platform, as highlighted in a 2023 Delphi Digital report. The report cautioned that Egorov’s $100 million in loans across various DeFi protocols could precipitate a catastrophic collapse within the DeFi ecosystem.

LLAMMA’s Efficacious Soft Liquidation Mechanism

In spite of the considerable strain on the Curve platform, the LLAMMA soft liquidation mechanism functioned as designed, Egorov articulated.

“The system exhibited exceptional performance, allowing liquidators ample time to marshal funds and conduct OTC liquidations of the hacker’s position. Consequently, the system now harbors no hacker funds, no adverse debts, and operates seamlessly.”

The soft liquidation mechanism operates by decrementing a borrower’s “health” status as a debtor, gradually liquidating their assets. Upon the borrower’s health reaching a nadir of 0%, the mechanism executes a hard liquidation, thereby closing out the loan.

In conclusion, Egorov’s resolution to fortify Curve, despite the recent upheavals, underscores a resilient commitment to the platform’s longevity and stability.