Venus Protocol faces liquidation on $150 million BNB loan as team takes preemptive action

Quick Take

  • Venus Protocol is facing a potential liquidation of a massive BNB loan position belonging to a hacker. 
  • The BNB Chain team expressed its intent to take over the position should the price hit the liquidation threshold, in an effort to mitigate the impact on the market.

All eyes are on Venus Protocol, a decentralized lending platform operating within the BNB Chain ecosystem, as a significant Binance Coin (BNB) position teeters on the edge of liquidation.

This position belongs to an entity that executed a massive hack on the BNB Chain last October, resulting in the loss of an estimated $120 to $150 million in cryptocurrency assets.

Exploiting the stolen BNB, the attacker leveraged Venus Protocol to borrow $150 million worth of stablecoins with sizeable position of 900,000 BNB (approximately $210 million). This position has remained in place since the hack.

With the tumbling crypto prices since last year, the health rate of this large loan position has come down to hover precariously around 1.03, dangerously close to its liquidation point. A drop in BNB’s price to $220, down from its present rate of $231, could trigger the liquidation process.

Taking over the liquidation

Yet the BNB Chain core team is set to take over the position if it hits the liquidation threshold, as reiterated by a tweet today.

In November, a proposal was passed that meant only the core team had the permissions to liquidate the position, in order to reduce the impact on the rest of the market were it to take place.

Earlier today, the developers started acting on this responsibility. They sent $30 million of USDT from Binance to the wallet that has permission to liquidate the position, as noted by analysts at Scope Protocol and confirmed by Venus.

"The whitelisted wallet was initially funded with $30 [million] in USDT with the assurance of preventing shortfall on Venus and providing additional support through this Venus governance approved mechanism," said Venus on Twitter.

The exploit itself

Last year's exploit involved the hacker manipulating security proofs, capitalizing on a vulnerability related to the “iavl hash check” within the BNB bridge. By exploiting this weakness, the attacker was able to mint 2 million BNB tokens, valued at $560 million at the time. 

In response to the attack, the BNB Chain team swiftly halted the blockchain, instructing all its validators to cease operations. This decisive action aimed not only to impede the attacker’s progress but also to salvage any exploited funds that the hacker had not yet transferred to other chains.

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