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Venus Protocol Cuts Collateral Factors to Zero in Seven Markets After THE Pool Activity

Venus Protocol states the THE market incident was caused by a legacy supply cap execution bug rather than a flash loan attack, prompting market pauses and broader collateral restrictions to contain bad debt.

Summary

Venus Protocol said the incident in its THE market was caused by a legacy supply cap execution bug, not a flash loan attack. According to the protocol, the attacker accumulated THE over about nine months, drove the token’s price from roughly $0.27 to $0.53, and left bad debt following liquidation. In response, Venus paused the THE market and set collateral factors to 0 for THE and eight other markets as part of its risk controls.

Terms & Concepts
  • Collateral factor: A lending risk parameter that sets how much users can borrow against the value of assets they post as collateral.
  • Supply cap: A protocol-imposed limit on how much of a given asset can be supplied to a market or system.
  • Flash loan: An uncollateralized blockchain loan that must be borrowed and repaid within the same transaction, often used in arbitrage or exploits.