Compound

The article discusses the invisible risk of DeFi across chains, where users' aggregate health factor is not visible, leading to potential liquidations during a cascade. A sequence of events can occur when multiple positions deteriorate simultaneously, triggering liquidation bots and further price drops. This creates a contagion path that can be predictable with the right signals.

The Curve Wars never had a lending equivalent due to structural differences between swap and lending risk, but a new proposal by Mezo team may change this. The proposal involves veBTC holders directing MEZO emissions toward markets that have demonstrated creditworthiness. This could lead to a similar power struggle as seen in the Curve Wars.

The Curve Wars have introduced a lending equivalent with veCRV and gauges deciding where emissions go, leading to liquidity becoming political. Yearn and Stake DAO start hoarding veCRV, while Convex rewrites the power structure by aggregating votes. The Mezo team proposes a mechanism for lending where emissions and risk pricing happen together.

In 2025, $150B was liquidated in DeFi, with a $20B single-day loss attributed to inadequate user protection tools rather than market conditions. Key issues include 24/7 liquidation bots, fragmented cross-chain dashboards, and limited predictive risk analysis, though solutions like flash loan-based deleveraging exist but are underutilized.

Aave and Compound have announced technical measures to address bad debt and restore full backing for rsETH tokens following a $290 million hack targeting Kelp DAO. The protocols aim to mitigate fallout by implementing solutions to stabilize the affected DeFi ecosystem.

The article discusses the KelpDao breach and its potential impact on DeFi platforms AAVE and Compound, highlighting concerns about systemic vulnerabilities in the DeFi space. The user questions whether this incident exposes a critical flaw in decentralized finance.