DeFi ecosystem suffers heavy blow: Euler Finance attack affects multiple projects

Euler Finance, as an innovative project in the Decentralized Finance space, is unique in that it categorizes assets into different tiers based on risk, with each tier having different lending permissions. However, the hacking incident that occurred on March 13 resulted in a loss of approximately $200 million for the project, an event that not only affected Euler Finance itself but also impacted several other DeFi projects associated with it.

As a foundational lending protocol, the security of Euler is especially important. The composable nature of Decentralized Finance (DeFi) has expanded the impact of this attack, resulting in losses of tens of millions of dollars for several other DeFi projects. Below are some of the affected projects and their loss situations:

1. Angle Protocol: This decentralized stablecoin project is estimated to have lost about $17.61 million. Although the project has a surplus of $5.58 million, it is still insufficient to cover the losses completely. The project team has decided to treat the funds of agEUR holders, liquidity providers, and hedge token holders as a whole and compensate proportionally.

2. Balancer: As a decentralized exchange, Balancer lost $11.9 million due to bbeUSD. Its Boosted Pools feature involves depositing a portion of funds into lending protocols, and this incident affected multiple trading pairs using bbeUSD.

3. Idle Finance: This yield aggregator has an exposure of approximately $10.99 million to Euler Finance in the Best Yield Vault and Yield Tranches.

4. Yield Protocol: As a fixed-rate lending protocol, its liquidity pool is built on Euler, with expected losses not exceeding $1.5 million.

5. Yearn: This yield aggregator indicates that yvUSDT and yvUSDC have a risk exposure of $1.38 million to Euler due to the strategies employed by Idle and Angle. The Yearn Treasury will bear the resulting bad debts.

6. Harvest: Similar to Yearn, its USDC, USDT, and WETH Vaults are affected by the use of Idle, with specific losses and handling plans yet to be announced.

7. Inverse Finance: Its USD stablecoin DOLA's liquidity on Balancer has been affected, with DOLA Fed losing $860,000.

8. SwissBorg: The Earn strategy of this crypto asset management platform experienced partial losses in ETH and USDT, accounting for 2.27% and 29.52% of the subscribed funds, respectively. SwissBorg stated that it will bear all losses.

9. Opyn: Its Zen Bull strategy has been affected, but the specific amount of loss and the handling method have not yet been disclosed.

10. Sherlock: As a Decentralized Finance security provider, Sherlock has voted to compensate Euler with $4.5 million and executed a payout of $3.3 million.

11. Sense Finance: This fixed-rate lending protocol is indirectly affected by fixed-income assets such as trading Idle.

This incident highlights the potential risks brought by the high interconnectivity among projects in the DeFi ecosystem. While composability is one of the advantages of DeFi, it can also become a conduit for the spread of security vulnerabilities. This reminds us that in the pursuit of innovation and efficiency, we must not overlook the importance of security. DeFi projects need to continuously improve security measures, and investors should carefully assess risks to address potential security incidents.