The Perverse Incentive Mismatch Between Lending and Borrowing Protocols

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Some have pointed out that this is actually a incentive mismatch at play where like, hey, you know, should someone be able to kind of do this in this type of scenario? There's like a founder could just rather than sell their tokens, take out a loan against it. And then who's the bag holder at the end of the day? Well, we'll get to that later. But maybe some of these protocols, maybe Aave gets a haircut. I mean, he didn't have any margin for error because he leveraged up his entire stuff.

A special mid-week episode is in order as we discus the string of events that led to one of the largest risks DeFi has faced in a long time. What happened to Curve, what's at risk, and what can we learn from all of this?

*CORRECTION: The address that exploited the CRV/ETH pool controls .082% of the circulating supply, not the 8% accidentally mentioned in this segment. ------ 🚀Join Ryan & David at Permissionless II in September. https://bankless.cc/GoToPermissionless

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0:00 Intro 7:23 EVM Exploit Explained 13:21 MEV Bot Sidequest 18:21 CRV Contagion 23:43 CORRECTION: SEE SHOWNOTES* 31:43 The OTC Bailout 35:43 Buying Mansions On Leverage 41:43 Second Order Risks 47:43 Who is to Blame? 53:43 Are we in the Clear? 56:43 Lessons Learned 1:01:43 Risks and Disclaimers ------ RESOURCES

DeFi's Contagion Curveball https://www.bankless.com/defi-contagion-curveball

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