Curve Finance Soft Liquidation Successful, CRV Drops 28%

Curve Finance’s soft liquidation system recently experienced a real-world test during a hacking attempt, managing to hold its ground effectively. The value of the platform’s native token, CRV, took a significant hit, dropping by over 28% amid the turmoil. Despite the notable decline in CRV’s price, the liquidation mechanism demonstrated its operational efficacy.

During the incident on June 13, Curve Finance’s founder, Michael Egorov, encountered intense liquidation pressures as the CRV token’s price plummeted. Onchain data revealed that Egorov engaged in multiple transactions to manage his debt, often executing rapid liquidations. He actively participated in both repayments and withdrawals involving various decentralized finance (DeFi) platforms, including Inverse Finance and

The soft liquidation approach is integral to Curve Finance’s Lending-Liquidating Automate Market Maker Algorithm, known as LLAMMA. This mechanism is designed to ensure liquidations can be carried out without leading to “bad debts,” which are debts that cannot be repaid or liquidated profitably.

According to LLAMMA’s official documentation, when a new loan is established, the collateral is divided into several bands across the Automated Market Maker. Unlike conventional liquidations with a single liquidation price, LLAMMA features multiple liquidation ranges. These bands allow for continuous liquidation of the collateral, if necessary.

The documentation also notes that positions undergoing soft liquidation or de-liquidation incur losses due to the selling and buying of collateral. Losses only affect loans in soft liquidation, diminishing the health of the loan. If the health of the loan decreases to 0%, it faces a hard liquidation, effectively closing the loan.

Despite these mechanisms working as planned, the market reaction was severe, causing an abrupt 28% decline in the CRV price within a 24-hour period. This rapid drop followed earlier warnings about systemic risks within Curve Finance, specifically related to Egorov’s substantial debt obligations.

The steep learning curve impacted stakeholders who scrutinize the platform’s risk management capabilities. While the event underscored the strengths of the soft liquidation mechanism, it also highlighted the volatility and risks inherent in managing large debt positions within the DeFi ecosystem.

Egorov’s active management of his debt positions through various transactions indicates an attempt to mitigate these risks. His strategic use of repayments and withdrawals across different platforms is a testament to the complexity of managing high-value positions in a volatile market.

While Curve Finance’s liquidation mechanism performed Reinforcing its reliability, the significant drop in CRV token value serves as a stark reminder of the market’s susceptibility to sudden moves and underlying vulnerabilities within the DeFi space.

13 thoughts on “Curve Finance Soft Liquidation Successful, CRV Drops 28%

  1. 28% drop in one day? DeFi is still a roller coaster. Trust is hard to maintain with these kinds of moves.

  2. A commendable performance by Curve Finance during a tough situation. Their liquidation mechanism passed the test with flying colors! 🥇

  3. Egorov had to do way too much scrambling! Shows how shaky things really are.

  4. This ‘successful’ liquidation test still led to a massive price drop. How is that success? 🤷‍♂️💸

  5. Curve Finance’s LLAMMA algorithm did its job! 💪 The CRV price took a hit, but the system held strong. Props to Michael Egorov for managing the situation well. 👏

  6. Curve Finance nailed it! CRV’s price drop was harsh, but their soft liquidation mechanism stood firm. Kudos to the team!

  7. Curve Finance proved its worth during a crisis. The LLAMMA mechanism worked effectively despite the market panic. Well done team!

  8. The robustness of Curve Finance’s liquidation system during the hack was remarkable! CRV’s decline didn’t take away from the techs efficiency.

  9. If Egorov needs to make all these moves to manage his debt, the system isn’t as robust as it seems. 😕⚖️

  10. Exceptional performance during tough times! 💪 Curve Finance’s liquidation mechanism delivered as promised, despite the CRV price drop. 🌐

  11. Even with CRV dropping, Curve Finance showcased the efficiency of its LLAMMA system. 💼 Great to see it work in real-world conditions! 🌐

  12. A big shoutout to Curve Finance! Their LLAMMA system stayed strong under pressure. The drop in CRV was unfortunate, but the tech is solid!

  13. LLAMMA working ‘as planned’ doesn’t matter much when CRV loses so much value. Not reassuring. 😕🔻

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