• DeFi protocols are coordinating to rescue about $300,000 in crypto that got frozen during the biggest hack of 2023.
• Balancer is proposing a “permissioned arbitrage” plan to raid its own trading pools before other arbitrageurs have the chance to.
• The plan needs approval from Balancer’s community members and requires cooperation from TempleDAO, Euler Finance, and Inverse Finance.
DeFi Protocols Rescue Frozen Crypto
A cadre of decentralized finance (DeFi) protocols are coordinating to rescue about $300,000 in crypto that got frozen during the biggest hack of 2023. The owner of the crypto, Inverse Finance, fears arbitrageurs are gearing up to grab the hoard once it unfreezes on June 8.
Balancer Proposes Permissioned Arbitrage Plan
A plan outlined Tuesday would see the automated market maker Balancer execute a “permissioned arbitrage” of its “bb-e-USD” pool “before anyone else can get to it,” according to a forum post from Balancer’s governance lead. Balancer had frozen the pool on an emergency basis in Mid-March when the borrow and lend platform Euler Finance lost $200 million to a hacker (who later returned the funds).
Other Protocols Involved
The plan needs approval from Balancer’s community members since it requires modifying mechanics. Organizers plan to hold a second vote on distributing recovered tokens once the arbitrage is complete. Other protocols involved include TempleDAO which will loan specialty stablecoins that are needed for conducting arbitration; Euler who patched up their smart contract; and Inverse who wants their money back.
Tech Challenges Overcome
People familiar with this matter said recovering Inverse’s crypto was not an easy task as there were plenty of tech challenges that had to be overcome such as finicky smart contracts along with multiple previous exploits making any chance at recovery invaluable.
Conclusion
This story serves as another example of how DeFi lego bricks lock together in complicated ways and how coordination between various protocols is necessary for success when attempting large scale operations like this one.