• Aave, a DeFi protocol, eliminated the bad debt of 2.7 million CRV tokens from a botched November trade by Mango Markets exploiter Avi Eisenberg.
• The move came after Aave’s community approved the procurement of the necessary CRV tokens using the ParaSwap decentralized exchange aggregator in a governance vote concluded on Tuesday.
• The action also took place prior to the activation of a major tech upgrade called Aave v3.
Aave, one of the leading decentralized finance (DeFi) protocols, recently cleared bad debt of 2.7 million curve dao tokens (CRV) from a botched November trade by Mango Markets exploiter Avi Eisenberg. The maneuver comes ahead of the activation of a major tech upgrade of the protocol called Aave v3.
The debt was cleared after Aave’s community approved the procurement of the necessary CRV tokens using the ParaSwap decentralized exchange aggregator in a governance vote concluded on Tuesday. The protocol is governed by a decentralized autonomous organization (DAO) and AAVE token holders vote on proposals.
The debt elimination was a result of an incident in November when Avraham Eisenberg roiled Aave with a trading strategy that involved borrowing tens of millions of CRV tokens from the platform. After a sudden price spike due to a short squeeze, his position got liquidated, leaving Aave with bad debt in CRV that amounted to $1.6 million at the time.
An analysis by DeFi data platform EigenPhi showed that the liquidator of the bad debt pocketed some $150,000 in fees. After the incident, Aave’s community voted to take action and eliminate the debt by acquiring CRV tokens.
The decision to clear the debt was made in order to ensure the smooth functioning of the Aave protocol and its services. By eliminating the debt, Aave will be able to secure enough liquidity to cover its obligations.
The move also serves as an example of the power of decentralized governance in DeFi protocols. Aave’s community was able to take swift action and come to a resolution that was in the best interests of the protocol and its users.
The debt elimination is also timely. It comes ahead of the activation of Aave v3, a major tech upgrade that will bring a host of new features to the protocol. With the bad debt cleared, Aave will be able to focus on the upcoming upgrade and continue to provide users with the best possible experience.
In the end, Aave’s debt elimination is a testament to the power of decentralized governance in DeFi protocols. It also serves as an example of the ways in which DeFi protocols are able to respond quickly and effectively to unexpected events. With the bad debt cleared, Aave is now in a position to move forward and take advantage of the upcoming Aave v3 upgrade.