Journalist
Posted:
- Aave has reclaimed its spot as the second largest DeFi protocol in terms of TVL.
- MakerDAO has seen a decline in TVL since it reduced its DAI Savings Rate (DSR) by 3%.
Decentralized credit platform Aave [AAVE] has regained its position as the protocol with the second highest DeFi TVL after a period of decline following the acquisition of Curve Finance [CRV] hacking in July.
Source: DefiLlama
According to data from DefiLlamaAave’s TVL currently stands at $4.72 billion, putting it just behind Ethereum-based liquid staking platform Lido Finance [LDO].
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MakerDAO’s brief stint at the “top”
On July 30, Curve Finance faced a reentry hack through which an attacker exploited a vulnerability in the protocol’s code to steal approximately $73.5 million worth of crypto assets.
Before the hack, Curve’s founder Michael Egorov had used some of his CRV holdings as collateral to borrow from various lending protocols, with the largest loan taken from Aave (over $100 million).
Mich confirms that the hacker received the large CRV pool.
That’s probably enough CRV to put Mich’s $100M+ in CRV into liquidation at Aave, Inverse, and Abracadabra if it isn’t absorbed.
This is going to be annoying for those protocols and for Curve.
Can rebuild, but may brace for impact https://t.co/5LHPE8jXxt
— Adam Cochran (adamscochran.eth) (@adamscochran) July 30, 2023
After the hack, CRV’s price plummeted, raising fears that Egorov’s loan would be liquidated. Egorov would have had to sell more CRV to avoid liquidation, which would have further depressed the price and possibly led to a contagion effect for Aave.
Update:
The #Curvefi founder (Michale Egorov) sold a total of 142.6 million $CRV to 30 institutions/investors via OTC at a price of $0.4 and received $57 million to repay the debt.
He currently has 269.8 million $CRV($166 million) in collateral and $48.7 million in debt across 4 platforms.https://t.co/8ozY1y5KrO pic.twitter.com/ITA08Fuf4f
— Lookonchain (@lookonchain) August 6, 2023
The details
In anticipation of a contagion effect, many liquidity providers withdrew their funds from Aave, resulting in a drop in the protocol’s TVL and a drop in the price of the AAVE token. For context, within seven days of the hack, Aave’s TVL plummeted 15%.
As liquidity providers and borrowers flocked to MakerDAO [MKR]Wrapped Ether Tokens (wsETH) deposits soared, sending TVL soaring, replacing Aave as the second largest DeFi protocol in terms of TVL.
To keep the traction going, MakerDAO increased its Dai Savings Rate (DSR) to 8% on August 1, and within seven days the total amount of DAI stablecoin deposited in the DSR contract rose from 339.4 million to 556 million, according to Makerburn.com facts.
Shortly afterwards a proposal was adopted Reduce the DSR to 5%, forcing some whales to remove previously provided liquidity from the DSR pool. For example, Tron founder Justin Sun withdrew 206 million in DAI and 235,556 WSTETH from the pool.
This resulted in a decrease in the TVL of the protocol. According to data from DefiLlama, MakerDAO’s TVL has fallen 9% over the past month.
How much are 1,10,100 AAVEs worth today?
AAVE sees new demand
The price of AAVE was trading at $62.07 at the time of writing and is up 10% in the past month, data from CoinMarketCap showed. This is due to an increase in new demand for the DeFi token. According to data from Santimentthe daily number of new addresses created to trade AAVE has increased by 20% since September 9.
Similarly, the number of addresses involved in AAVE transactions daily has increased by 6% since then.
Source: Santiment