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1/ Introducing the Crypto Banking System, a roadmap to bring DeFi to be a challenger to TradFi
cryptobanking.network/the-crypto-ban…
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Sébastien Derivaux
5.2K posts
Sébastien Derivaux
@SebVentures
#cryptobanking scholar Founding Chef at @SteakhouseFi Too boring for #DeFi, too punk for #TradFi
Strasbourg, France Katılım Haziran 2009
976 Takip Edilen12.4K Takipçiler
@CometShock @ImperiumPaper @Morpho Directionally correct, just not that easy to implement.
I'm not a fan of the junior, because I don't think people are willing to pay. But adding barrier to entry of new curators is good for business so ...
We have a similar feature on our new non lending vaults.
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My proposed solution to mitigate a lot of these issues would be a Morpho V2.0-like structure, with the following improvements:
- commonplace for curators to post first-loss junior capital and with extended withdrawal delay
- could also see justification for very short withdrawal/deposit delays
- for cases where curators take a risk on hardcoded oracles, a instantly callable function for temporarily suspending operations.
more on suspending operations:
- new deposits blocked
- at-risk allocation is temporarily marked to 0 and reflected in new pessimistic share price
- existing depositors may force withdraw by receiving pro-rata of underlying market shares (circumvents hostile curator gating)
- existing depositors can optionally withdraw at pessimistic share price without handling underlying market shares (this should be unique function call from standard withdrawals to prevent hostile suspension from capturing spread)
- curators cannot adjust allocations outside of deallocating to index asset
- upon settling the at-risk allocation, share price updated to reflect new reality and remove suspension
IIRC a lot of this falls in line with changes you've called for in recent past
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I'm calling on @Morpho curators to strongly consider migrating their Morpho v1.1 vaults to Morpho V1.0 or V2.0 vaults (and for V2.0 to deallocate any v1.1 subvaults).
Yes, the Resolv hardcoded oracle still allowed for bank run dynamics in all versions, where the last capital out could be left holding the bag.
But v1.1 vaults never socialize bad debt and therefore will always have bank run incentives... even if the Resolv oracle was operating normally.
V1.0 and V2.0 have mechanisms to quickly socialize bad debt within the vault's share price, as long as the underlying crisis market's oracle is actively representing what's happening.
This is one marginal improvement that can be done today, and then later we can make progress on a solution that addresses stale/hardcoded oracles.
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@CometShock @Morpho V2 migration is in progress, but changing systems is not a trivial task
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@SebVentures @Morpho acknowledged it would not have changed the Resolv hack, but there's room for improvement with a simple migration
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~$3.9B is in v1.1 @Morpho vaults
v1.1 vaults do not socialize bad debt
~$3.9B is exposed to "last withdrawer" bank run problems, even if oracles are functioning properly
☄️⚡@CometShock
I'm calling on @Morpho curators to strongly consider migrating their Morpho v1.1 vaults to Morpho V1.0 or V2.0 vaults (and for V2.0 to deallocate any v1.1 subvaults). Yes, the Resolv hardcoded oracle still allowed for bank run dynamics in all versions, where the last capital out could be left holding the bag. But v1.1 vaults never socialize bad debt and therefore will always have bank run incentives... even if the Resolv oracle was operating normally. V1.0 and V2.0 have mechanisms to quickly socialize bad debt within the vault's share price, as long as the underlying crisis market's oracle is actively representing what's happening. This is one marginal improvement that can be done today, and then later we can make progress on a solution that addresses stale/hardcoded oracles.
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Brings me back in 2020 (2021?) when I was using @harvest_finance . Now their are using a @SteakhouseFi product.
The loop is looped.
Harvest@harvest_finance
The Morpho-Only USDC Autopilot is now entirely routing liquidity toward the reliable and highly liquid V2 deployment on Base curated by @SteakhouseFi Benefiting dozens of Harvest users.
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@CamiRusso @ResolvLabs Actually you hurt them with spot, it would quickly sell collateral at a 90% loss. Also would be risky from an oracle manipulation perspective creating another risk for lenders
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@SebVentures @ResolvLabs somebody has to get hurt either way. you protect borrowers by using NAV, you protect lenders by using spot
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Why does this keep happening??
- Hacker stole $25M by getting access to Resolv's keys and minting 80M of the USR stablecoin.
- Losses from the hack grew because vaults had fixed $1 pegs to wstkUSR (leading traders arb de-pegged USR. Depositors looking for nice stable yield were left holding the bag)
Similar cases:
xUSD / Stream Finance
USD0++ / Usual Money
wUSDM / Mountain Protocol
I get that market creators fix the price of yield-bearing stables to avoid liquidations when there's volatility, but there has to be a way to distinguish volatility from a fundamental de-peg.
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@CamiRusso @ResolvLabs We are trying to solve this by having a rating system. High yield vault is B (high risk). Resolv was rated CC so very low.
Most people should stick with AA and A.
Not perfect but something.
app.steakhouse.financial/earn/1/0xbeeff…
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@SebVentures @ResolvLabs of course people will be lured to higher APYs, the problem is the actual risks they're taking are not fully disclosed, or are not explained in a user friendly and accessible way imo
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@CamiRusso @ResolvLabs Yes, but it's actually the best solution. Using the market price of USR would have been a disaster.
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you're right that technically it's not a hard peg, but a daily update based on NAV, which showed $1.13 at the time of the exploit, worked as a de facto fixed-value and didn't reflect the actual market price of the asset. In practice, the result for lenders was the same as a hard coded peg.
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@flipdazed @farid_bouakline @safetyth1rd @Marczeller It's onchain calculation, but not at every tx (which is not the solution neither as it is easy to game and gas intensive)
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@SebVentures @farid_bouakline @safetyth1rd @Marczeller ok so it's just their NAV reporting pushed on-chain? That seems expected right? It sounded like Chainlink messed up
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Ngl as much as I like morphos simple design
Every lending exploit I see is an argument to “Just Use Aave” as @Marczeller likes to say
Togbe@Togbe0x
50 milly minted to some random wallet and started dumping morpho markets likely to have some issue with debt as degens were able to buy cheap wstUSR and borrow USDC in fixed rate markets meanwhile gauntlet bots rush to supply more to a broken market...
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@CamiRusso @ResolvLabs Or maybe the fair debate is why people are still lured by higher APY after all those events.
I said it in the past again and again, most people should stick to Prime vaults.
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Also the isolated nature of Morpho helped vs a monolithic approach.
Using a monolithic approach, the attacker could have infitine mint, put as collateral and borrow all the liquidity of the protocol (up to the cap), here it was limited by the market and public allocatior.
The issue is that some curators have continued to allocate without noticing the issue. It's all automated processes. This is the fair debate to have.
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@farid_bouakline @flipdazed @safetyth1rd @Marczeller The USR oracle is here (not sure it' used everywhere, but should):
etherscan.io/address/0xf9C7…
It's not related to Chainlink but use Resolv internal accounting. It is not realtime, and now is paused.
It's probably a good structure, otherwise you would have cascade liquidity to $0.
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@flipdazed @SebVentures @safetyth1rd @Marczeller I’m not suggesting a Chainlink protocol failure, but rather data staleness
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@safetyth1rd @Marczeller So it is not about Aave, is about the Aave service providers that do DD. Which can be debated.
For the public you mention, I would say that Prime Morpho vaults are what is needed, would you disagree?
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@SebVentures @Marczeller Nope. The point is it’s not just about the design
Morphos design is more elegant and neat
But aave has better curation , user and risk experience for most people who don’t have time to curate the curators, analyze assets and risk.
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@farid_bouakline @flipdazed @safetyth1rd @Marczeller I'm not sure people saying it was hardcoded checked before making the claim.
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@flipdazed @SebVentures @safetyth1rd @Marczeller Surprised nobody mentioned the hard coded peg 1 USDR:1 USDC set in some venues. F on what I have some Laps were left over worthless usdr
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@safetyth1rd @Marczeller I thought we were speaking design not USR.
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Sébastien Derivaux retweetledi
Brief update on this weekend's events
Zero exposure and zero losses across all Steakhouse vaults on all platforms. Our full company treasury is allocated to our own products. We continue our existing public commitment to withdraw last in the event of meaningful losses.
Steakhouse Financial@SteakhouseFi
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@SebVentures @SteakhouseFi To be clear: @kpk_io is not withdrawing from its own vaults, and is not "leaving". Can't speak for other curators.
Withdrawals have been open throughout the incident. Based on what we know today, I don't see a reason to rush, but everyone should decide for themselves
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If you are a depositor in those vaults, you need to withdraw or face a loss. The curators are forcing removal of markets, this will create an economic loss that you can avoid by withdrawing. There is large liquidity on some of those vaults.
@SteakhouseFi vaults are not affected.
YAM 🌱@yieldsandmore
Please check if you're deposited into any of these Morpho vaults and WITHDRAW, some of them still have liquidity. There's no reason to wait for the curators to force remove the Resolv markets and hope that they cover the (potential) bad debt, protect yourself. Most of the vaults will force remove the Resolv markets in approx. 2 and half days (timelocks), socializing the bad debt across depositors. List of vaults with withdrawable liquidity: @gauntlet_xyz Seamless USDC Base: $10.26M of deposits, $9.88M of liquidity, 381k of exposure (3.7%) Link: #overview" target="_blank" rel="nofollow noopener">app.morpho.org/base/vault/0x6…
@gauntlet_xyz USDC Core Mainnet - $20M in deposits, $7M in liquidity, $5M of exposure (25%) Link: app.morpho.org/ethereum/vault… @kpk_io USDC Yield Mainnet: $2.65M in deposits, $2.35M in liquidity, 221k in exposure (8.3%) Link: #overview" target="_blank" rel="nofollow noopener">app.morpho.org/ethereum/vault… @Re7Labs USDC Mainnet: $2.14M in deposits, $1.66M of liquidity, 450k of exposure (20%) Link: #overview" target="_blank" rel="nofollow noopener">app.morpho.org/base/vault/0x1… @Extrafi_io USDC Base- $1.26M in deposits, $834k of liquidity, 433k of exposure (34%) Link: app.morpho.org/base/vault/0x2… @MEVCapital USDC Mainnet: $7M in deposits, $969k in liquidity, $52k of exposure (0.73%) Link: #overview" target="_blank" rel="nofollow noopener">app.morpho.org/ethereum/vault… KeyRock USDC Mainnet: $2.47M in deposits, $1.36M in liquidity, 36k of exposure (1.4%) Link: app.morpho.org/ethereum/vault… These vaults have no liquidity,: Gauntlet USDC Frontier, Resolv USDC, 9Summits USDC, Apostro Resolv USDC, Clearstar Yield USDC, Clearstar USDC Reactor It's still worth trying to withdraw, others might repay or deposit, you never know. Use @antonttc's tool to spam the withdraws: github.com/antoncoding/au… Most of the vaults above with liquidity available have lent against wstUSR AFTER the incident, which makes it significantly less likely that @ResolvLabs cover any bad debt here. Please withdraw. Good luck! English
@SteakhouseFi To be clear, @SteakhouseFi is not withdrawing anything and not affected anyway.
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@SteakhouseFi Even the curators are withdrawing from their vaults, so there is no reason to stay.
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