Pac Finance, a decentralized finance (defi) lender iteration of Aave on Coinbase’s layer-2 chain Blast, encountered an issue when attempting to adjust its loan-to-value (LTV) parameters on April 11. Inadvertently, the Aave fork reduced its liquidation threshold, resulting in on-chain analytics showing participants incurring substantial losses denominated in ezETH. The Pac Finance team announced that they are working on a plan to mitigate the error, stating, “In our effort to adjust the LTV, we tasked a smart contract engineer to make the necessary changes.
However, it was discovered that the liquidation threshold was altered unexpectedly without prior notification to our team, leading to the current issue.”
To prevent similar mishaps in the future, Aave pledged to establish a community forum to discuss potential upgrades and changes to its defi lending protocol. Similarly, Pac Finance intends to deploy a governance contract to enhance transparency and rebuild user trust. Stani Kulechov, the Founder of Avara, highlighted a fundamental issue with forking code, citing the lack of comprehensive understanding of the software and its parameters.
The lending market represents one of defi’s most significant sectors, enabling users to borrow and provide liquidity to the burgeoning crypto ecosystem. According to DefiLlama, lending protocols hold nearly $35 billion in total value locked (TVL).