Bankless - Will DeFi Survive This?

Episode Date: August 2, 2023

A special mid-week episode is in order as we discus the string of events that led to one of the largest risks DeFi has faced in a long time. What happened to Curve, what's at risk, and what can we learn from all of this?   *CORRECTION: The address that exploited the CRV/ETH pool controls .082% of the circulating supply, not the 8% accidentally mentioned in this segment. ------ 🚀Join Ryan & David at Permissionless II in September. https://bankless.cc/GoToPermissionless  ------ 📣 STADER LABS | ETHX LIQUID STAKING https://bankless.cc/Stader  ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://k.xyz/bankless-pod-q2   ⁠ 🦊METAMASK PORTFOLIO | MANAGE YOUR WEB3 EVERYTHING https://bankless.cc/MetaMask   ⚖️ ARBITRUM | SCALING ETHEREUM https://bankless.cc/Arbitrum   ⁠ 🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle  ⁠ 👾POLYGON | VALUE LAYER OF THE INTERNET https://polygon.technology/roadmap  🗣️TOKU | CRYPTO EMPLOYMENT SOLUTION https://bankless.cc/Toku  ------ TIMESTAMPS 0:00 Intro 7:23 EVM Exploit Explained 13:21 MEV Bot Sidequest 18:21 CRV Contagion 23:43 CORRECTION: SEE SHOWNOTES* 31:43 The OTC Bailout 35:43 Buying Mansions On Leverage 41:43 Second Order Risks 47:43 Who is to Blame? 53:43 Are we in the Clear? 56:43 Lessons Learned 1:01:43 Risks and Disclaimers ------ RESOURCES DeFi's Contagion Curveball https://www.bankless.com/defi-contagion-curveball  ------ Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://www.bankless.com/disclosures ⁠ 

Thankless Nation, we have a bonus episode for you today because I think this requires almost a midweek look at what is going on in crypto, specifically. What is going on with Defi, David? So much going on with the Curve Protocol. I know you are fresh back from climbing mountains, but I need your help with this. Duty calls. Yes. I need your help to understand what happened. Can you give us the TLDR of what we're going to cover in today's episode?

Yeah, so there has been a series of events, which of all one has led to. another. There is a coding language called Viper, which is an alternative to solidity. So it is an Ethereum coding language that had an exploit in the actual coding language that affected a certain number of defy protocols across Ethereum, especially and most importantly, Curve, which is a systemic, I would call a systemically important defy protocol, has had some very important pools, curve pools drained. And that has led and put pressure on the CRV token specifically because the founder of Curve, Michael, has put up a bunch of CRV tokens as collateral across Defi. So just to recap, a coding language had an exploit in it, which led to Curve liquidations.

And because the founder of Curve had so much CRV tokens as collateral across lending protocols, we are potentially on the cusp of a liquidation, cascading liquidations of the CRV token across Defi, which might put holes into the balance sheets of many of these Defi lending protocols. Did you catch that? I did. And I'm so glad we called David down from the mountains in order to help us with this episode, David. I'm so glad you're back. I think what we're trying to do in today's episode is just unpack this story.

And let folks know as well that it's still developing. So we'll have more things to talk about. But really, in bankless fashion, we want to talk about what just happened in the events in order to learn from this, in order to level up on crypto. So we're going to discuss what happened. What's currently at risk right now? You might be wondering, are my assets safe? Is this a systemic issue for all of Defi? How scared should I be?

And then finally, what we can learn. I think that's the flow of this episode. David, you want to say anything else before we get ready to get in here? Yeah, just a few more bits about Curve and why it's so important. I would say Curve is kind of a yin to a yang of Uniswap, perhaps, but it's specifically meant for trading like kind assets. So stable coins trade with stable coins, ether trades with other versions of synthetic ether. And so like staked ether trades with rocket pool ether or Alchemics ether, which is one of the pooled strains is traded with, you know, ether. So like kind assets is what curve.

is really meant for. And it's got just a huge, huge amount of defy built on top of it. TVL in curve, total value locked in curve was 3.2 trillion up to the point of the way billion, billion, billion,

billion is a different number. One cycle. We'll do that. 3.2 billion down to 1.7 billion. So it takes like a 30% haircut in the TVL. Part of that is because the hacker stole money, but really most of it is that people, kind of flee from from this.

And so we'll probably watch some of that TVL return. But the total sum of all of the assets stolen by this exploit or by this exploit is about $70 million. But 20-ish million dollars of the stolen money was taken back by a white hat M.E.V. Bots, which is another very interesting part of this story. So the hacker has gotten his stolen assets. stolen from them and some white hat MEV bots have returned some capital to some pools. So we have to unpack that as well. And so this is going to be, there's a number of different rabbit holes to go

down around this particular topic. And we're going to try and take our time to point towards each individual one. Yeah, there's, there's so much to talk about. And yes, what you need to know at the outside of this is curve is a very important protocol in all of defy. I would say systemically important. And it certainly got a bullet wound here. So we're going to explore. all of that. Guys, we'll be right back with the episode to walk you through everything that happened, what this means moving forward. And to answer the question, is Defi safe? Are we going to make it? But before we do, we want to thank the sponsors that made this episode possible, including Cracken, which is the absolute best way to onboard into crypto. Go create an account.

Cracken Pro has easily become the best crypto trading platform in the industry. The place I used to check the charts and the crypto prices, even when I'm not looking to place trade. On Cracken Pro, you'll have access to advanced charting tools, real-time market data, and lightning fast trade execution, all inside their spiffy new modular interface. Cracken's new customizable modular layout lets you tailor your trading experience to suit your needs. Pick and choose your favorite modules and place them anywhere you want in your screen. With Cracken Pro, you have that power. Whether you are a seasoned pro or just starting out, join thousands of traders who trust Cracken Pro for their crypto trading needs.

Visit pro.cratkin.com to get started today. Introducing Polygon 2.0, the value layer for the internet. For too long, the limitations of blockchains have held back app development and stifled user adoption. The internet allows anyone to create and exchange information. What's missing is a value layer that lets anyone exchange, store, and program value. That's where Polygon 2.0 comes in. Polygon Labs has unveiled a series of innovations that will radically alter the Polygon ecosystem and Web3 as a whole. By leveraging groundbreaking ZK innovations such as Polygon ZK EVM, the next iteration of the next iteration of the best in-class Plonkey 2 proving system, and a first of its kind, ZK-powered interoperability

layer, Polygon 2.0 will give users and deaths, unlimited scalability and unified liquidity. Right now, there is a Polygon improvement proposal regarding a potential ZK-powered upgrade of Polygon proof of stake. If approved, Polygon proof of stake would become a layer-2 ZK-EVM-V-V-Lidium. So make your voice heard on this proposal by joining the Polygon Discord today. You have a chance to help the Polygon community give the Internet the value layer it deserves. Are you planning to launch a token? Is your token already live? And are you granting your employees and contractors vesting token awards?

And are you trying to figure out how to take care of taxable events for your team? Toku makes implementing a global token incentive award simple. With Toku, you will get unmatched legal and tax support to grant and administer your global team's tokens. Toku will help you navigate across the life cycle of your token from easy-to-use pre-launch token grant award templates to managing post-cliff taxable events with payroll. For legal, finance, and HR teams, it's a huge. huge complex task to have to comply with labor laws, payroll, and tax obligations, tax reporting, and crypto regulations in every country that you employ someone. It's difficult, time-consuming,

manual, and costly, and it's drawing more attention from global regulators and governments. Toku makes it simple for leading companies in the space, Protocol Labs, Hedera, Gitcoin, and many more. So if you want some help in navigating the complex world of token compliance, go to Toku.com, class bankless, or click the link in the description below. And we're back, Bankless Nation. When you hear the words EVM Compliance, Tyler reveals a zero-day vulnerability. It's not a good day. No, that's not scary.

That's scary. That's a very deep part of the tech stack. And so there's something that actually we need to define before we move on here. There's a specific kind of vulnerability here. And this is called a re-entrancy attack. This is actually re-entrancy attack is actually how the Dow hack got hacked. And so a re-entrancy, it's a very specific type of exploit. It's when a contrast.

is checking to see the account balance of something, of someone, of some asset, but the attacker is able to actually execute something before the contracts are able to finish checking the state of something. And so it's like you are able to remove cash from the vending machine. And then before you finish the transaction, you actually just keep on pressing, hey, withdraw my money, hey, withdrawal my money, hey, withdrawal my money. And so you re-enter, I'm doing my best as a non-dev. This is really good, honestly. You re-enter the same, like, hey, you owe me $15.

Hey, you owe me $15. Hey, you owe me $15. And before you finish processing the transaction, you just say, hey, withdraw my $15 times. And then you finish the transaction. And it's $15 turns into, you know, $70 million. That vending machine analogy is working for me, like just like the mental imagery. So, you know, you press D5 or whatever.

and you got your Snickers bar, but now you can keep hammering on that button. But before the vending machine delivers you the Snickers bar, you keep on saying, give me a Snickers bar, and then you do as many times as you can. Unlimited times. Yeah. So that's a very simple, like, reentrancy attack.

That's how the Dow hack got hacked. And sadly, because in the Viper language, the coding language that this vulnerability was expressed, forgot, did not have the appropriate checks, reentrency checks. So that's a very deep level of like why this is all happening to begin with. Just really quick on Viper, though. Okay, so it's an alternative to solidity.

It's much less used compared to solidity. And so I'm not a developer, so someone come correct me. But my understanding is solidity is a bit more like JavaScript-ish. Like, and whereas. It's a little more hardened, yeah. Viper is Python, right? So it's kind of like Python derived. And so it's a different language.

It was supposed to be more simple, a bit more functional. But it hasn't had a lot of adoption, but it does in some in some pockets, including in Curve what we're about to talk about. Yeah, so we're looking at a tweet thread here from Bankless HQ, our analyst Jack, who just did a bang-up job, really just covering all of this. And so if you want to read the tweet thread or also the newsletter, these are also fantastic sources. You can also read the Viper tweet broadcasting the reentency vulnerability and the next tweet, Ryan, the next tab that you got or that one as well.

Yeah. And so Viper language, Twitter account says, Viper versions, 0.25, 16, and 3. are vulnerable to malfunctioning reentroncy locks, the investigation is ongoing, but any project relying on these versions should immediately reach out to us. The project, of course, in question is curve, as we said in the beginning.

And so I think we've done a pretty good job explaining what curve is, but it is, to put it into a metaphor, the marketplace for like kind assets. It is a place where tether gets turned into Dye, where Dye gets turned into USDA, where USC gets turned into any other stable coin.

And so not all curved pools were coded in Viper, only a certain number of them. And the curve pools that were coded in Viper have all been exploited by this one exploit. So a handful of contracts, all for ETH pairs. And so there are one, two, three, four pools that got exploited. P-Eth with Eith pair, MS-Eth with Eith, L-Eth-Eth.

from alchemics. And so this is Pendle, Heath. I can't remember what MS is. It'll metronome alchemics. And then also the curve ETH pair itself, which is the Curve DAW. And so Pendle Eth, that is, got drained for 6,000 ether. That's $11

million. Alchamix Eth got drained for 1.6 million of ether and then 1.8 million of metronome ETH, excuse me, not an alchmic's metronome. Metron Alchemics got drained for 7,200, Uff, ether, which is 13.6 million, and then 4.8,000 ether of Alchemics, ether, which is 9 million.

And then the curve eth pool, which is the source of all of this further contagion, got drained for 7,200, 700,000 CRV tokens, which is $5.1 million at the time of exploit. You can imagine that these curved token has gone down in price since, as well as 7,700 wrapped ether out of the curve Dow and then also 2,800 more ether. So if you sum it altogether, it's about $70 million. That $70 million came like from my set of four different protocols, one of them being curve. But it's really the source of this contagion and why this is getting into a bigger and bigger story

is that 7.2 million curve tokens that got taken out of the curve ether pool, and is now in the hands of the attacker. And so that is the recap of the assets that has been stolen out of curve. Okay. So we'll talk about sort of why this matters and where we are right now because this does have some wider implications that's kind of spreading to other protocols. Here, we'll talk about that. But a quick side quest on how this actually works in practice.

So my understanding, David, is that some MEV bots captured some of the exploited funds here in the process, right? And maybe you can kind of explain how block building works and how this actually works. I was talking to some people who are staking in Rocket Pool, for instance, some very large, called execution layer fees, right? Some MEV fees were not donated. That's the wrong word. We're awarded to the Rocket Pool community essentially as a result of this. The Rocket Pool Protocol process the block that had a significant number of MEV bots bidding for some of the exploited funds. Exactly.

And Rocket Pool just happened to process the block. Therefore, a lot of these stolen funds turned into MEV and then got, you know, turned into rewards for Rocket Pool and a few others. But Rocket Pool has like, that's where kind of the conversation is because, well, what does Rocket Pool would do with the funds? Well, and what does it do? It basically spreads all of that, those MEV proceeds across all of the individuals. Yeah.

So a lot of stolen funds just got sprinkled out to individual rocket pool stakers. Which is interesting. And I think a quick side quest here, well, here's another one. So one, M.EV. I wasn't just Rocket Pool. This is an MEV bot called CoffeeBabe.Eath actually returned some of the money from the exploit. So it returned $5.4 million.

dollars. So if you're an individual staker, right? And this is kind of like a lottery system. So it's a bit of random chance as to whether you'll get this reward in kind of the execution layer reward in MEV or not. But if you just suddenly receive $5.4 million worth of ETH in ill-gotten gains, the question is, what do you do with it? Is it finders keepers, losers, weepers? Did you just find like, oh, I found $20 on the floor? I mean, you can't be like, hey, does any, Does anyone own this if you find that out in public? But in this case, you actually kind of know who owns the money. You could trace it.

So what do you do? Do you refund it? So I think it depends on the context, right? When we talk about Rocket Pool, and we're taking a very early rabbit hole down this one topic before getting into the rest of the contagion event. So this is definitely a side quest, but this is just what happens so early in these cascade of events. Coffeebabe.eath.

actually I need to check this if this is true Ryan but coffee the coffee babe.eath front ran created an M-EV bot after the first CRV ether liquidation in the time that the another re-entrancy attack was going to happen again but the second time that the hacker tried to steal funds I don't know why they're they didn't just do it all from the first from the first exploit like why didn't they steal 100% of it some funds might have come in from bots. There's a bunch of extra questions here. There's a lot of dust to be settled. But in the time that the exploiter decided to attack the CRV-Eath pool again, Coffeebabe.Eath coded up at MEVBot and front ran that second and then also third exploits. And so in that second exploit,

coffeebabe.eath front ran the exporter and got 2,879 ether that was drained from the curve ether pool again. And then that is now being returned to the curve deployer address, which is going to be able to actually determine where the right destination of that eth goes. But that's just because this one person figured out a way to code up this MEV bot, take responsibility and control over stolen assets and stole money from a thief to return it like back to the rightful owners. But like when it goes back to like, okay, what about a decentralized system like,

rocket pool. These are all interesting questions as to how to actually contend with some of these things. Yeah. So I guess in this case, the coffee babe case, it's a bit more white hacky and that like they just exploited something the exploiter was exploiting. And then so they refunded the funds. And that, that to me is much more, I guess, morally clear. What's less clear is the case where you have this big MEV reward and it's distributed across the pool of, say, stakers. Right. Like what do you do? Do you actually practice? And so what's interesting? With M.EV burn, this would not have been able to happen. That's the thing. That's kind of the punchline. I think that that is important here because

what I'm worried about, David, is I don't know if you've seen some MECA legislation that came down the bike last week, but there was some MECA legislation that basically would make it illegal to benefit from MEV of this kind, like the unethical style of MEP. And I get worried about that when that sort of thing is settled in MET space because then we go down this path of, well, do all validators have to be like checked by the state, AML KYC? Like how does the nation state actually enforce that? Because the protocol level is not.

Anyway, it's an interesting side quest. But I agree with you that the best solution year is probably MEV burn because then at least it's credibly neutral. And we sort of socialize these proceeds all over all eat holders. I guess, you know, we're socializing the guilt there. I mean, I would still put a white hat hacker ahead of that. Because just because we're burning it doesn't mean we are okay with. with people having their money stolen.

Agreed. Well, so let's get back to the main event. So what tweet are we looking at here? Okay, so this is Taylor Monaghan, who we actually just did a Twitter space with, talking about some of the white hat hackers and just giving praise of coffee, babe.e, you know, truly a babe. But we need to get into the contagion event that is around CRV,

because as soon as CRV is sold, first, there's not that much liquidity right now. I don't know if you notice prices, Ryan, but as bullish as we are, we're still in the bear market. So liquidity is already thin. And then when the CRV ether pool of where CRV gets its liquidity gets exploited, you would imagine that liquidity goes, A for that reason, and then B, because anyone else also supplying liquidity to curve token around defy, get scared of getting dumped on so they withdraw their liquidity. So now we're at the point of that. the story where the contagion is kind of around surrounding Curve the token, right? CRV the token. Yes, exactly. And so CRV, the token liquidity starts to drain. We accidentally

see a flash crash of curve down to about 10 cents from 70 cents. And so inside of a very small period of time, curve went from 70 to 10 cents and then back up to 60 cents pretty quickly, pretty quickly without liquidating curve collateral across various defy lending protocols, but you can see how, I mean, I remember Terra Luna. I remember how and the curve is not

Terra Luna. Never forget. But we all remember how liquidity just drained very quickly surrounding these assets when it needed it the most. Hey, Bankless Nation, in this section you're about to hear, I say 8% of curve tokens. I actually meant 0.8%.

I'm off by one order of magnitude. All the points still stand, so everything is directionally correct, but 8% is 10 times larger than the correct number, which is 0.8%. So we have spliced in this audio just to correct that for the record. And now back to the show. And so people fled for the hills,

and all of a sudden curve the token is in a very precarious position where it doesn't take that much cell pressure to push that price down. Now, that wouldn't be bad. Like, tokens are allowed to go down in price. That's a normal thing to happen. This is what we do in D5.

Things go up in price. go down in price. But that's just not where the story ends, sadly. And so the curve exploiter as a result of the curve pool, the ether curve pool currently holds 8% of the circulating supply of CRV. And so that is about seven, that's seven million curve tokens that we can see in the exploiters wallet. That's a lot of curve. Eight percent of the total circulating supplies a lot of curve, especially when the hacker is capable of pressing a button and market dumping that thing and also simultaneously liquidity providers stop providing liquidity because they don't want to be dumped on. And so all of a sudden, liquidity dries up. And so this is setting up the dominoes.

The dominoes are currently set up for a bad event in curve tokens. And we haven't even gotten to all of the collateralized CRV positions across DFI, but you know, you can. And guess where we go next? Well, let's just park that for one second. So this was the exploiters wallet, the hackers wallet, as of the 31st. So July 31st. And by the way, all of this happened, I believe, earlier in the week, it was, you know, a bloody Sunday or bloody Monday, depending on your time zone, August 30th or August 31st.

And so the state of the hackers wallet at this point in time was all of the curve tokens that you were talking about, 8% of the circulating supply. and also a whole lot of ether as well. So about $14 million worth of ether. What's crazy about this, and I know I don't have to emphasize this for longtime crypto natives and bankless listeners, but we are witnessing yet again a bank heist play out

in real time on the internet. And we get to see it unfold step by step. And I just want to pause and reflect on how crazy is that, that all of this is public, and the on-chain sleuths can track every single transaction here. And we actually see the address of the exploiter. And like we can see every single move that this person is making in real time. That to me is just we'll never, we'll never not be crazy.

But yeah, that's what's happening here. Yeah, this is what the blockchain provides, right? Like global eyes are all watching the same addresses and the same contracts. There is currently a game going on right now around CRV. People that own CRV before, you know, traders, Defi, who, Defi people who play the Defi game, a lot of people are watching the current state of CRV because if it's been two days, the Curb Exploiter has not made a transaction in two days. But that, I mean, Curve is one button press away from basically being nuked to zero. So liquidity is currently kind of like resettling itself around. People are, there's a new equilibrium being established.

but this exploiter has, you know, they have 7, 8% of all Curve supply token of the Curve supply. So it's a precarious position to be in. And like I said, we haven't even gotten to all the Defi lending protocols that are out there. So let's talk about that next. And this is where sort of the founder of Curve kind of enters as a main character here. The founder, Michael, his last name starts with an E, I won't pronounce it correctly. Igorov. Yes.

Igorov. Yes. Yeah, I got, yes. And so Michael owns 48% of the circulating supply of curve. So this is very heavy. Michael has very heavy curve. He hasn't sold. Yeah, hasn't sold.

I guess maybe bullish. Maybe a four-seller. But he has been doing something with all of those curve tokens. And the thing that he has been doing with, again, almost 50% of the supply of this not-very-liquid token, right? There's a lot of it. He's been lending that out. Or sorry, excuse me. He's been borrowing against that with lending and borrowing protocols.

And here's a list of them here. In Ave, there's about 34% of that. I'm not sure how much amount of curve. It's about, so the round numbers, think of about 50 cents, a token right now. So $150 million in Ave V2, about $25 million. in abracadabra, $20 million in inverse finance, $12.5 million in inverse finance, excuse me, $20 million in Fraxland. And then, you know, $1.6 million in staked out and $1.2 million in silo. Like, everywhere that curve is accepted as collateral, this guy has a margin account.

Michael, Michael, Michael, what are you doing, bro? So let's talk about that. 48% of the circulating supply is not just in the hands of Michael, the founder of Curve. It is also deposited as collateral in lending protocols everywhere. This guy is levered to the tits, dude. Well, we don't know. Well, actually, I think we know pretty conclusively because, okay, let's recap what a collateralized loan actually is. I don't know, David, if you've ever been DGEN enough to actually take out

a collateralized loan with a heavily volatile asset. Oh, you are? So you've been in the situation where you're looking at your liquidation number for the price of something. Let's call it ether, right? And you have a lot of your ether locked in collateral, right? So that's what the lending protocol essentially does is you can deposit some asset in this case, it's curved, but you could deposit ether. And then what do you get in return? You get, you know, some stable coins, let's say, so maybe it's die or maybe it's, you know, something else in the AVE protocol. And what do you do with those stable coins, right? Oh, you just put that somewhere else and in treasury bills, right?

It's free money, right? It's free money. It's free money. Buy whatever you want. No, I mean, you don't do the responsible thing generally with these stable coins, which might be like park them in T bills and you earn an interest. Or I don't even know if that makes sense. It would depend on kind of the amount that you're paying for it.

You're probably buying something in real life. you're probably betting on other tokens. Maybe you're so bullish on ETH that you take a loan against your ETH in order to buy more ETH. I don't know if I'm talking to anyone in the bankless audience. I don't know. I don't know a single person who does this behavior. I don't know a single one. Dude, this will be any of my friends.

David, this almost wrecked me like legitimately. Oh, yeah. You have the reputation of being like gas and I'm like more bricks. Okay. Old Ryan, uh-uh. Man, I like this. this felt this felt very like rakesy to me but like i had a number oh do you remember when ether was above a thousand back in 2019 or sorry back in back in 2017 2018 yes yeah yeah i had a number

i was like there's no way ether could drop below a hundred right ether just hit $1,400 how could it ever touch $100 couldn't do that couldn't so so you could take out a responsible loan in a like lending protocol that was maybe double digits and that was responsible Let me tell you. The day, did crypto hummel you? The night, Ether went down into the 80s. Your boy was almost liquidated hard that day, all right? And so like, we got the balance.

Wait, did you do it? Did you have it like a compartmentalized trading account or was it like your main stack? You know, I'm not going to get into the details here on today's episode. But yeah, we've got a take that talks about this from Van Spencer later on the show. Let's talk about that later. So anyway, so you've got to imagine Michael here, the founder is absolutely like sweating because the value of his curve is going down. He's got a liquidation number right here. And then also the interest rates are going up.

That's kind of the context here as we talk through the rest of these details. Yeah, no, that's right. And so on AVE is the big one. So on AVE, Michael has 305 million curve tokens backing a $63.2 million USDT loan. that's tether. And so in the AVE protocol, there are liquidation parameters for any single collateral. Like ether gives favorable liquidation parameters because there's no like there's no smart contract risk. It's very liquid. Curve doesn't have nearly as favorable parameters around the liquidation thresholds inside of Avey. And so he gets a 55% loan to value like margin. And so

$305 million of Curve backing a $63 million loan. And so, you know, that's pretty healthy, but you only, you only get 55% of that. And so that, you know, turns into if a curve price drops about 33%, he would be liquidated. And then he's also paying 4% APY.

And that is before Curve got exploited. And so when once all of a sudden people realize that Curve, the token, is at risk of going to zero because there is not enough liquidity in the market to absorb a market sell from the exploiter, people realize that lending stable coins to any of the marketplaces that has curve as collateral is risky because all of these lending protocols might have bad debt. If curve goes to zero and all of the curve tokens get liquidated, but that's not enough to cover the whole, then all of a sudden stable coin suppliers

are left holding the bag if the protocol cannot cover the difference. And so what, what happens? What does the rational economic actor do in this scenario? Well, they stop taking the risk. They're saying like, hey, they're not, they're not going to take the 4 to 10% APY in the result, and when they might lose 50% in the next day or so. So they start withdrawing. And so what happens when a defy lending protocol has stable coins withdrawn from it,

the utilization ratio goes up as in more and more of a percentage of these stable coins that are lent to these protocols are actually already being borrowed. And so this is just a natural way for these ABE money market type systems to naturally balance themselves. When there's not many stable coins, there's insufficient supply of stable coins lent to the protocol and more people are borrowing them than supplying them. It just jacks up the interest rates. And so here's Delphi Digital's tweet. at 100% utilization, which is for tether, which it currently is at, all tether, all tether tokens,

all USDT supply to AVE is being borrowed by Michael and others, because all the USD lenders are like, oh, no, I'm getting out. So at 100% utilization, the interest rate doubles every 12 hours. The current payment that you pay for borrowing tether from Avey is 81%.

And that can increase to a maximum. of 10,000% APY after just 3.5 days. So basically, you're like, Michael's got a date with Destiny. He's going to get liquidated at this current rate because the interest rates are just accruing up to his point of regulation too fast. Unless there's a hope, David, unless he can continue paying. Unless he can pay the interest and stay ahead of it, right? Keep just staying ahead of it as the interest rates in case.

He needs to pay down his, he needs to sell curve for tether and pay back his loans. that's what he needs to do. That's hard when the price is dropping, right? Yes, especially when the price is dropping, yes. So, but this is what he did, actually. So he was able to sell some of his loans. This tweet doesn't have it specifically. There's another tweet we have later in this agenda,

but he has OTCs a bunch of curve, and he gets about $16 million. Yes, here we go. So Sandra is an account that apparently covers OTCs, trades. And so here are some curve movements from Michael to other people. That's 17.5 million curve to an unknown address. Five million curves sold to Justin's son. So Justin's son coming into bid. 4.25 million curve to DCF God. 2.5 million curve sold. Two point five million curve sold. So buyers are stepping in and buying curve. We do not know the price that they were sold for.

Ignis, Defi Research, who I think does a pretty good job, hypothesize about four cents a token. And with the current curve price of about, I think, 55 cents, if you want to pull up Coin Gecko for Curve, that's a pretty hefty discount. 58 cents. So you can go to Curve or Uniswap, wherever CRV is sold right now in the market and buy a Curve token for 58 cents. Not financial device.

Not financial device. I'm saying this is just what the market is offering. It's just what the market is offering you. There's speculation that the OTC trades for a very large, amount of curve tokens, he was getting about 40 cents per token. And that's just because, you know, if he had sold these tokens on the open market, he would have gotten probably a worse rate than that. So again, you're Michael. You don't want to get liquidated, right, at a very low price. So what are you trying to do? You're just trying to stay a step ahead and you're trying to like ideally pay down

those loans in order to free your money. So what are you doing? You're getting funds from other sources off chain, basically. So Justin's son coming in with like a $3 million check and buying some curve tokens. OTC. That just means over the counter. It's just like private telegram group or something where, yeah, Michael's like, hey, Justin, you want to buy some curve? And he's like, what will you give me? And then Justin's like, I'll give you, or Michael's like, I'll give you this rate. And, you know, Justin, I'm sure has some provisions. That's what's happening in order for, for Michael to kind of raise these funds. Yep, that's exactly right. And so, uh, raising about $16 million. And so remember, remember, he's got an outstanding debt of $110 million pledged against $290 million of curve tokens. That's before curb rent down on price.

So he owes $110 million and he just raised $16 million. That's not a lot. That's not a lot. He needs a little bit more margin than that. Ironically, okay, so this is the Van Spencer take that I was talking about earlier. Defending your liquidation price on chain is a religious experience. call God. Call God.

That hits, man. That's that hits. I have been there. I have done that before. So this is Michael, ironically. I don't mean to kick a guy when he's down, but this is just too good. July 22nd. How many days ago was that?

10 days ago. Still having, still shocked that I haven't yet been affected by defy hacks. Ooh. Shit. Oof. That's unfortunate. Man. Yeah.

I mean, but I guess there's an element of, you know, it is, it is kind of shocking, but now it's happening. Wow, you can never count your chickens here. Yeah. Okay. So this individual lives in Australia. And there's a, there's a few Australian DFI protocol founders who are also, I don't know if they directly are, but they imply that it's kind of funny. It's a funny meme on crypto Twitter that they just have these like mansion comparison fight like mansion offs if you will. Really? Michael, yes, Michael has not one, but two mega mansions in Melbourne, Australia. Not too far away from our good friend, Anthony Cisano does not have a mansion. That I know of, not the one I've been invited to.

He bought, this is actually this picture, these two pictures that we're seeing at, this is actually the same mansion from different angles. I don't know where the other one is. This one, he bought for $40 million. This is, for the bankless listeners who are not watching the YouTube, an insane house. An insane property. We're looking three. It's kind of nice.

Yeah, we're looking at three stories. It's got to be like, it could be like a 10 bedroom kind of thing. There's a pool. There's like a guard. It's, that is a mansion and a half. Let me just say, we don't know the particular circumstances for Michael. He could have been like made his investment money elsewhere. He could have like bought Bitcoin, you know, back in 2010, the proceeds.

But one has to wonder if some of the state. Cable coins that he withdrew borrowed against his curve went to fund in real life things. Well, Ryan, he bought this house two months ago. And he currently borrowed $110 million to buy a $40 million mansion. I don't know if it was directly, I put up money inside of Avey. I withdraw stable coins, send it to my bank account and buy a house with that money. I don't know if it's that clear. but when you buy a $40 million house with $150 million of stable coins borrowed,

that factors into your decision making at some point in time. I think so as well, at least I can say that it factored into my decision making. And again, not knowing, you know, Michael's particular situation, it's impossible to fully weigh in on it. But why would someone do this, right? Like one reason to do this is you don't have to sell your curve tokens. There might not be liquidity. if he owns 50% of the curve market, right? And he were to just like sell even 5% of that.

It's going to tank price for a while, right? So why sell your curve token? If you're bullish on the project, you're kind of the founder, when you can lend it essentially in a protocol and you have a liquidation price, so you know kind of the minimum amount you'll make from it. That's one reason you might want to do that rather than just kind of market sell

in order to buy your in real life stuff or like, you know, get some money out of the system. the other reason you might do it is to avoid capital gains taxes. What wealthy people have been doing all the time. Rather than sell your actual asset, you just get a loan against that asset, borrow against that asset. You don't have a capital gains tax event, and then you can go do whatever you want with the proceeds. That might be another reason. Impossible to speculate.

But one thing I will say at this point in time is the lesson is, you guys ready for it? Don't use leverage. All right. Like, this is a very bad position to be in. I don't, you know, like, it seems very clear that Michael does not have the liquid cash in order to pay down his loans or else he would. I'm sure he's sweating. This could happen to you, bankless listener, if you kind of play these games with volatile assets. So that is one lesson, certainly we can take away from this. But there are definitely other lessons here on the whole leverage piece. Like, leverage is a tool. It requires, like, you really need to be thoughtful and intentful when you use it and why you're using it. The mistake,

like leverage is a tool. So like can you use leverage? Of course you can. When you use leverage with your entire stack, you don't give yourself any margin for error because you have no more bullets left. And so when you use all your money and then you leverage all your money, you got nothing, you have no tolerance. And so the thing that Michael did not account for when he was making, his economic decisions, like, granted, like, he didn't, he didn't account for Curve getting exploited. He didn't account for a reentroncy hack and viper. And that's why we're here today. But, I mean, he didn't have any margin for error for any sort of event like this whatsoever because he leveraged up his entire staff. I mean, I will say some of made the point that this

could have been intentional and that there's like a, there's like a perverse incentive going on here too. Because what you can do in a way is, is if you are a, um, you're a, um, you're You have a large, you know, amount of some particular token. You get a loan against it. You sort of set your sell price as kind of a liquidation price, basically. And, you know, if you kind of go under, there's an element that you can socialize your losses to that protocol. So like, some have pointed out that this is actually a incentive mismatch at play where like, hey, you know, should someone be able to kind of do this in this type of scenario? There's like a founder could just rather than sell their tokens, take out a loan against it.

And then who's the bag holder at the end of the day? Well, we'll get to that later. But maybe some of these protocols. Maybe AVE gets a haircut. And so it's AVE token holders, you know, rather than Michael in this case. I see a little bit of that. But at the same time, that is what the protocol is supposed to do. That's what if you're a lending and borrowing protocol, you're supposed to manage risk appropriate in these types of scenarios.

So, okay. So moving on in the story. One of the things that's going on right now is that all of these lending protocols are realizing that they are at a precarious position for exactly what you said, right? If curve gets market sold, then all these lending protocols have bad debt. And so what are these lending protocols doing? Well, Fracts, AVE, they're all naturally increasing the interest rates at which they are charging Michael. And so interest rates are going up. Another interesting thing about this story, Ryan, is that Avey not too long.

had a governance proposal submitted from Gauntlet. And Gauntlet does exactly this kind of thing. It does economic modeling on chain. So it tells you about like potential Black Swan risk events due to the parameters of liquidity for particular assets. Just in June 18th of this year, not too long ago, Gauntlet said they, hey, Gave, he needs to free CRV and jack up the risk parameters around CRV because the. on-chain liquidity does not bode well for any sort of, it's a precarious position. And Gauntlet identified this a month ago. It's too risky.

It's too risky. Exactly. Yeah. And this was actually struck down 100% to zero by AVE governance. Wow. And so Gauntlet said, hey, just, you know, not even 12 days ago, 12, 20, 14 days ago, two weeks ago, Gauntlet was like, hey, like, this curve, these curve parameters are all whack. They need to be fixed. We need to shut down this market.

And Alvei was like, Avey governance was like, nah. And it was because there's a single, they say this, the motivation, looking at the risk profile of this address, I assume this is Michael's address. This one account has borrowed roughly $63 million. Oh, yeah, that's Michael. $190 million of CRV. We recommend, yeah, to one, freeze CRV collateral. And they basically, oh, they're recommending to freeze CRV collateral and set the curve LTV to zero is what they recommended back then. That's interesting.

Okay. So actually, so I'm just learning this right now. In this post, Gauntland says, as of June 13th, this account, Michael,

has borrowed 63 tether, a million dollars of tether against 190. So I didn't realize how recent this was, but again, of course, recently,

just a few months ago, he bought the house. And so, and then the viper exploit happens. Wow. Wow. Well,

this is what the, this is why it's kind of hard to govern lending and borrowing protocols, isn't it? This is kind of the squishy role where you have to, like, assess the risk of a particular asset before you let it into the lending and borrowing protocol and set kind of your threshold for how much can be borrowed against it and how much you're willing to lend, right? And that's what's happening on these governance forms because if you get it wrong, what's the cost? Well, your protocol, your token has to essentially absorb that somehow.

You know, if you have kind of an insurance type of a side pocket. So you're the one getting a haircut from that. So it's interesting that this was updated so close to the event. I'm sure people wish they could like change their vote. But a little bit late now. All right, so there's a few more topics that we have coming up in the rest of the show. We have this protocol game of chicken that we need to talk about. Brian and I are going to unpack what's really at risk here? Like what happens? Like in theory, what would happen if there is a cascading liquidation event? What happens if Michael does get liquidated? What happens to that? Is there a systemic risk in defy?

And then we got some takes in what we are going to be able to pull out as learning lessons from this event. So all of that is coming up right after we talk to some of these fantastic sponsors that make this show possible, especially Metamask. And Metamask is a brand new feature, MenaMask portfolio, which can give you the lay of the land for all of your collateralized positions that maybe you should keep a better eye on as we go into this bull market. Let's go here from MetaMask right now. Are you a metamask user? Well, you're listening to Bankless. So, of course you are.

The wallet you know and love just got a whole. lot better. Metamask portfolio is the ultimate one-stop shop for all of your crypto needs. It gives you a holistic view of your crypto portfolio across multiple chains and multiple addresses all at once. You can easily view and manage all your coins, tokens, and NFTs in one convenient place just by connecting your wallet. Metamask portfolio goes beyond just viewing your portfolio, though. Inside the portfolio, you can do all the incredible money verbs that make defy so powerful. You can buy, swap, bridge, and stake your crypto assets with ease. It's like having a powerful, for all your defy

moves right at your fingertips. So if you're looking to do more in Web3, your way, Metamask portfolio is the answer. I already know that you have Metamask wallet, so go check out your Metamask portfolio. Learn more at metamask.io slash portfolio. Mantle, formerly known as BitDAO,

is the first Dow-led Web3 ecosystem, all built on top of Mantle's first core product, the Mantle Network, a brand new high-performance Ethereum Layer 2 built using the OP stack, but uses Eigenlayer's data availability solution instead of the expensive Ethereum layer 1. Not only does this reduce Mantle network's gas fees by 80%,

but it also reduces gas fee volatility, providing a more stable foundation for Mantle's applications. The Mantle treasury is one of the biggest Dow-owned treasuries, which is seeding an ecosystem of projects from all around the Web Free space for Mantle. Mantle already has sub-communities

from around Web Free onboarded, like Game 7 for Web Free Gaming, and Buy Bit for TVL and liquidity and on-rads. So if you want to build on the Mantle Network, Mantle is offering a grants program that provides milestone-based funding to promising projects that help expand, secure, and decentralize Mantle. If you want to get started working with the first Dow-led layer 2 ecosystem,

check out Mantle at mantle.xyZ and follow them on Twitter at ZeroX Mantle. Arbitrum is accelerating the Web3 landscape with a suite of secure Ethereum scaling solutions. Hundreds of projects have already deployed onto Arbitrum 1. With a flourishing defy and NFT ecosystem, Arbitrum Nova is quickly becoming a Web3 gaming hub, and social daps like Reddit are also calling Arbitrum home. Now, Arbitrum orbitram's secure scaling technology to build your own layer 3, giving you access to interoperable, customizable permissions with dedicated throughput. All of these technologies leverage the security and decentralization of Ethereum and provide a builder experience that's intuitive, familiar, and fully EVM-compatible.

Faster transaction speeds and significantly lower gas fees. Arbitrum empowers you to explore and build without compromise. Visit arbitram.io, where you can join the community, dive into the developer docs, bridge your assets, and start building your. your first app on Arbitrown. One of the big parallels, Ryan, that I think I remember after covering the three errors capital liquidation was that a very low number of people can actually be the reason of systemic contagion in crypto. Remember when three hours capital was getting liquidated, they were doing whatever they can,

pulling out all the stops to borrow as much money from different corners of the crypto ecosystem as possible. And that's how like Voyager, BlockFi, you know, any lender that would lend money to three hours capital all got effed because three are capital was the contagion. And so I actually see a similar pattern. That's one of the big learning lessons between that and this is Michael put curve in every single place in defy that would allow him to collateralize curve. And so now all this, this is how the contagion happened. One single actor actually spread out all of the contagion and because of the weakness in the curve, all of a sudden this is how contagion works. Avey, for example, where the

biggest loan position is actually does have an insurance fund. And so they have the safety module, which grows and grows and grows from fees collected by the AVEA Dow. So there's $327 million in the AVEA safety module, which is actually more than enough to pay for any sort of hole that Michael may leave in AVEA. There's one problem here, which is that that safety module, $327 million, is actually denominated in AVEA. So there's a little bit of reflexivity there. And so if AVE, I think AVE would, if the worst case scenario, they would have to cover like $80 million or $60 million of curve in AVE. And so like if they, they were going to have to sell Avey into the market and to cover that loss, which means that the actual size of that safety module is also precarious because it's denominated in its own token. Yeah.

But that's one of these, another one of these rabbit holes. That's the token holder haircut. That's the token holder haircut. Yeah. That sale is going to affect the price of Ave if it's. Yeah. Same exact mechanism. is when MKR has to get sold to cover for bad die debt, which actually only happened once,

which was Black Thursday, right, during COVID, when you were getting the... I remember that. How much was that? That was just a few million. It wasn't that much. It was, yeah, $12 million. I think it was... But $12 million back then was actually a decent number of amount of money because we were all

super broke. All of crypto was broke. But yeah, that's kind of the precarious nature of like using your protocol's own token as the defense, as the... the line of defense. I think that's very precarious. Like, that's systemically. Yeah, that's a great point here. But at least they have a at least they've got it. Yes. I alluded to this earlier, but I'll double down on it now because Michael had a curve all over lending protocols. Different lending protocols are all realizing that they need to get paid back first or else they might not get paid back at all.

And so Michael rushed to repay the loan on Frax lend first because that's where the borrowing rates were highest. And so now naturally, all the other protocols with Curve Clateral also want to increase the borrowing rates because they're like, I mean, this is, this has happened to try to find out. They don't want to be, they don't hold the bag. Yeah. So they're like, hey, we need to jack up the rate. So Michael pays us back first.

And so there's this like protocol game of chicken going around because no protocol wants to be holding the back. And so who are these protocols? We talked about them earlier. But magic internet money, MIM, inverse finance, silo, Dow, and all. are all these different protocols that are all figuring out how to deal with this problem. Silo Dow has for some reason is chill, says Ignis from D5 Research. D5 Research is just what he does because the risk is isolated.

That's a must be a specific design for a money market. But each one of these protocol Dow's are like figuring out like, hey, we we don't want to hold the bag. Let's jack up the interest rates. Well, that's a real like a molock trap. Big mollock. Because like we would all be better off. Like everyone just put.

interest rates to zero like honestly at this point like we're rooting for michael like all of defy wants him not to get liquidated or it causes bad things at this point in time so rooting for his positions anyway and um you know but what happens is when you have this kind of prisoner's dilemma the scheme of chicken then you're incented to kind of defect first yep and the you know the faster they defect and the more they raise interest rates the more likely it is that michael gets liquidated and so that's kind of a bad race condition uh that's happening right now Yeah, so that's what's currently going on with the AMMs. What else is there to talk about?

It's systemic risk to defy. Is there systemic risk to defy? I don't think so. I don't think these holes are that big where, like, I have, I currently have an AVE position. It's not curved-denominated, and I'm not lending stables into Avey. I'm not necessarily too worried. I don't really think, I don't feel like I'm at risk. I do hold AVE tokens, but I mean, I've hold them down to lower numbers than what they might go to.

So I'm not particularly worried about that either. I don't think there's that much contagion. But there's a big fog of war here. I agree. I mean, the thing affected right now, the contagion seems to be primarily focused on the CRV token itself and then everything affected. And so there's a question of like, well, you know, the contagion has kind of spread to these lending and borrowing protocols essentially. And it's not going to be existential probably for any of them, but it is a haircut. But it's like some pain.

And the question is, well, will they look at these governance protocols, like these governance proposals a bit more carefully when they're from gauntlet or something? And there's like one single, you know, holder with a very large portion of the of the lent amount. I think the answer is yes. And that is how we all level up together. But I don't, I agree with you, David. but I don't think that at this point in time, this spreads systemically across all of Defi. So that is good because the reality is this could have been a lot worse, right?

Zero day Viper EVM bug, right? Again, you said at the very beginning, those are words you do not want to hear. And so we are like, we are hashtag blessed that this wasn't a far worse event at this point in time. Well, knock on wood, because it's not over. I just sent you a tweet in the Zoom chat if you want to pull that up from Delphi Digital. So this is the current as of about 24 hours ago. Yeah, 24 hours ago.

This is the current positions that Michael has. So Avae Frax and Abercadabra, a $54 million owed, $8 million owed, $14 million owed with all the different collaterals and different liquidation prices. He's currently paying, he might have already paid off the frax. He's currently paying 124% APY on 8%. million dollars borrowed from fracks he's currently paying 50% APY on 54 million dollars borrowed from aube and then 18% on 14 million dollars borrowed from abracadabra liquidation price the highest one is at avey which is also the biggest position at 37 cents so that is the line that curve must stay above in order to prevent any sort of cascading liquidation unless michael can somehow raise more

to raise more capital. Off chain and pay down those loans. But 37 cents is the number to stay above. What's the current price of curve? You want to open up that coin? Go ahead. Current price of curve. 58 cents.

So he has room. He's paying a lot. He's paying a lot. The chart doesn't look great, but 58 cents to 38 cents, that's, there's room there's a chance for sure. You can make it. This is like a, if he makes it, he can make it. You can make it.

Wow. But like this is like watching a slow motion train wreck that actually might not happen. It's just like it looks like it's about to happen, but it might not happen. It might be able to bail this out. Rune Christensen had to take here. Curve getting exploited, risk of bad debt and liquidations in the ecosystem. This might seem like it's an overmoment, but perhaps it's just cycles. This cycles black Thursday.

That's the one you were referring to. Rune would know a thing or two. You see, he calls this maybe the last crash before the bull market with everything coming back, 100x stronger. Yeah, well, there's some element to that maybe. I think that's right. I think that could be. I like to pattern match history.

I love that pattern match. I like bull markets. Yeah, and this is, this guy would know a thing or two about, because Rune, he's the founder, Maker Dow, he was definitely paying attention when Maker Dow had its Black Thursday. Now we're having Black Sunday, Monday. Well, so let's talk about this. Let's end the episode here, David, with, what do you think we, we learned from all of this. What's what's your take on the lessons here? The biggest thing that's

rattling around in my brain is man, curve had a lot of Lindy. That protocol was deemed safe. What do you mean Lindy? Lindy is how would you explain Lindy very simply? I always would you like to use the example. What do you think is going to be around? What would you make a bet on in being around in a longer amount of time. The pyramids of Egypt or the White House? It's clearly Egypt, right? Yeah, because the White House is like a couple, it's like 100 years old. In fact, the first White House burned down.

And so it's Lindy got reset very quickly. Fun fact, we're on the second White House already. Pyramids of Egypt have been around for thousands of years. So like, what are you going to bet on to be around for another thousands of years? The thing that's already been around for a thousand years. Curve had a lot of Lindy. It had a lot of TVL for a very long amount of time. and then it got hacked.

I think this might set the record as like the longest Lindy resetting event in Defi's history. I think that's probably correct. And that hurts. But you know what's also interesting here is like it also wasn't Curves fault at all. Yeah, it wasn't curse fault. I think there's a lesson here. And that lesson is almost like scary. So this wasn't like a smart contract risk where Michael and the curve team, the developers

over there could have been more careful, wish they had audited more, that sort of thing. Right. This was deeper in the stack. Yeah, that's as deep as it goes. This is a problem at the kind of EVM compiler level with a Viper, specifically a couple of versions of Viper. It was like introduced at one point in time and then it kind of like, you know, it was no longer the case in the newest versions of Viper. It was like, you know, accidentally introduced. That in itself is kind of scary. So we might say that solidity has a stronger Lindy than Viper because it's an older language and it also has more assets that are dependent on. It's more vetted, right? And so I think there's a lesson here of,

well, again, what do we always say at the end of every bankless podcast? Crypto is risky. You could lose what you put in. The lesson is you never know. But then there's also a question of what other zero-day bugs lurk in the codebase out here. And I do think that, you know, solidity, EVM is becoming a bit more like Egypt, you know, pyramids. And I wonder and worry about some of the newer languages and other ecosystems, at some point in time, something like Salana is going to have its Viper. Its compiler moment. Yeah.

Yeah. In Viper itself, which is interesting. What's the future of Viper? Who's going to use it moving for? Right. Yeah. So there's that kind of learning here. The last thing I'll say is, is this an example?

Do you think of like, okay, so Viper is a public good, right? I guess I feel like all of the, many of the actors. who have some responsibility for this, you know, are kind of like feeling the brunt of this. So in that way, DFI is kind of performing as expected. It's not like socializing the losses to, you know, the public, right?

So if you, if you are in AVE and you chose to lend more money to curve, kind of knowing the risks here, well, you get a haircut. That's as it should be, right? If you are Michael and you're like lending all of the CRV inside of a protocol and taking excessive leverage,

well, you get hit too. And so you're kind of, you know, I guess punished for this. And of course, curve is, as with all Defi protocols, appropriately risky. So from my perspective, it kind of, defy is performing as expected, except that there's this one thing, this public good that we call Viper, an EVM language. How well funded is that? Right. It's like the public infrastructure that we're really not paying attention to.

And so there's probably other places like this inside. of crypto that are woefully underfunded, but should be funded far better and should be audited and should be vetted far better because that's Atlas's shoulders that the entire thing is kind of hanging on. So that's another takeaway to me. Yeah. And this is something that you can audit, you can vet, you can audit again, you can audit again. You'll never know. You'll never actually know. You're muted. Is there anything comforting here? as we end. Silver lining

because it couldn't have been worse. I mean, we made it, right? That's good. We made it, did we? We did. We made it. I mean, imagine if this had been a solidity, like, EVM issue.

Yeah, right. What happens then? Yeah. What doesn't kill Defi does make it stronger? Yeah. I guess that's a takeaway. Yeah. And all of the protocols performed as expected,

according to the rules. We didn't socialize losses. There were no bailouts. I don't know. There's a silver lining there, David. I think I'm going to take a few moments to try and think of some more silver linings, but we'll do it on the weekly roll-up tomorrow. Guys, that's it.

We've got to end with this. I think quite appropriately. Risk and disclaimers. Crypto is risky. So is D-Fi. You could lose what you put in, but we are headed west. This is definitely the frontier. It's not for everyone, but we're glad you're with us on the bankless journey.

Thanks a lot.