After Mango Markets exploit, Compound pauses 4 tokens to protect against price manipulation

Decentralized lending protocol Compound has paused the provision of 4 tokens as lending collateral on its platform, aiming to guard customers towards potential assaults involving value manipulation, just like the latest $117 million exploit of Mango Markets, in response to a proposal on Compound’s governance discussion board that was lately handed.

With the pause, customers will be unable to deposit Yearn.finance’s YFI (YFI), 0x’s ZRX, Primary Consideration Token (BAT) and Maker’s MKR (MKR) as collateral to take loans.

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The proposal handed on Oct. 25 with 99% of all voters in favor. It said:

“An oracle manipulation-based assault analogous to the one which value Mango Markets $117m is far much less more likely to happen on Compound on account of collateral property having a lot deeper liquidity than MNGO and Compound requiring loans to be over-collateralized. Nonetheless, out of an abundance of warning, we suggest pausing provide for the above property, given their relative liquidity profiles.”

In a safety evaluate of Compound v2 carried out in September, the Volt Protocol group identified potential market manipulation dangers associated to low-liquidity tokens. The report defined: 

“The assault is feasible when the quantity of a token borrowable on markets like Aave and Compound is giant in comparison with the liquid market. Probably the most notable instance is ZRX, which has borrowable liquidity on every of those markets akin to or larger than the same old every day quantity throughout all centralized and decentralized exchanges.”

On Twitter, Robert Leshner, founding father of Compound, defined that the conservative method wouldn’t influence current customers. 

Following the @mangomarkets exploit, @gauntletnetwork has proposed disabling new provide for essentially the most thinly traded collateral.

This conservative method will not influence current customers, and encourages the migration of utilization to Compound III (which is proof against the assault vector). https://t.co/yMQDgRXru7

— Robert Leshner (@rleshner) October 21, 2022

On Oct. 11, Avraham Eisenberg, the hacker behind the Mango Markets exploit, manipulated the worth of a posted collateral — the platforms’ native token, MNGO — to increased costs, then took out important loans towards the inflated collateral, which drained Mango’s treasury.

The exploiter, self-described as a digital artwork vendor on Twitter, claimed that he and a group of hackers undertook a “extremely worthwhile buying and selling technique” and that it was “authorized open market actions, utilizing the protocol as designed.”

After a proposal within the Mango’s governance discussion board was authorised, Eisenberg was allowed to maintain $47 million as a “bug bounty” whereas $67 million was despatched again to the treasury.