Decentralized finance protocol Yearn.finance recently experienced a major setback due to a multisignature scripting error, leading to a significant loss from its treasury. The fault occurred during a conversion process on CowSwap, where Yearn was trading its yVault LP-yCurve (lp-yCRVv2) tokens, accumulated from vault performance fees, into stablecoins. This mishap caused the entire treasury balance of 3,794,894 lp-yCRVv2 tokens to be swapped, resulting in a drastic 63% decrease in liquidity pool value and a loss of approximately $1.4 million.
Yearn’s team has confirmed that the affected funds were strictly part of the protocol’s treasury, assuring that customer funds remained unimpacted. To mitigate the consequences of this error, Yearn.finance is appealing to arbitrage traders who profited from the incident, requesting them to return a portion of the funds. This plea extends to on-chain messages directly sent to some traders. In response, one arbitrager has already returned 2 Ether, valued at $4,500, expressing empathy and acknowledging the risks they undertook.
In light of this event and a previous $11.6 million exploit in April, Yearn.finance is taking steps to prevent future occurrences. These include segregating protocol-owned liquidity into specific manager contracts, implementing human-readable output messages, and setting stricter price impact thresholds for their operations.
Disclaimer: Please note that the information provided in this article is based on the referenced research articles. It is essential to conduct further research and analysis before making any investment decisions. The cryptocurrency market is highly volatile, and investors should exercise caution and consult with financial professionals before engaging in cryptocurrency trading or investment activities.