Hi Algofi Community. In recent weeks a lending protocol on Solana, Mango Markets, faced an exploit in which an attacker was able to artificially inflate the price of MNGO collateral in order to borrow more funds than the collateral was actually worth. This has already inspired one similar attack here. In response, lending protocols across the DeFi ecosystem have proactively reduced risk - Solend for instance has suspended less liquid tokens such as RAY, SRM, and ORCA and is moving to lower their collateral factors.
In response to this and other exploit attempts occurring in the DeFi space, the Algofi team has conducted a thorough review of the lending protocol and DEX. This has been done out of an abundance of caution and to protect the community. The goal has been to understand if there are any attack vectors that could be opened up by attackers deploying large sums of capital to manipulate open market pricing.
Given these developments, the Algofi team has decided that out of an abundance of caution the most prudent way forward would be to decom more volatile collateral assets. At this time what that looks like is winding down STBL2/ALGO, STBL2/goETH, and STBL2/goBTC in the lending protocol. Based on the team’s review there is no current exploit, but these types of assets which can vary widely in value based on trading activity offer an elevated point of risk. The lending pools will continue to operate as normal, but additional LP collateral in the lending market from these pools will be capped. This is in line with the actions that have been taken by a number of protocols and in keeping with best practices.
Additionally, BANK emissions for these markets (see BANK emissions proposal) and the upcoming USDC/ALGO and STBL2/BANK lending pools will be emitted to new staking contracts rather than lending markets. This has the effect of incentivizing liquidity growth in the lending pool without the potential for a hypothetical attack. This also has the added benefit that staking contracts are included in veBANK boosting.
A governance proposal is in the works to decrease the collateral factors for these markets over time to completely phase out these pools.
As a community we should all continue to take into consideration all developments in the DeFi space to make sure we build the strongest, most secure protocol possible. The actions here were not taken lightly – we look forward to spirited discussion.