Compound Finance, the Ethereum [ETH]-based decentralized lending protocol, has taken a significant step that will reduce its vulnerability to DeFi exploits. DeFi exploits have single-handedly managed to wreak havoc on the cryptocurrency market. Additionally, several DeFi platforms have fallen victim to these attacks over the past few weeks.
Compound Finance wants to limit borrowing
DeFi protocol users voted to accept a proposal that will adjust risk parameters for ten Compound V2 assets. In other words, a credit cap comes into effect that limits users’ ability to borrow.
Assets include wrapped bitcoin [wBTC]Uniswap [UNI]chain link [LINK]Sushiswap [SUSHI]and aave [AAVE] among other. Prior to this proposal, there was virtually no limit to the amount of wBTC that could be borrowed from the protocol.
The limit will be adjusted to 1250. Other tokens that saw their limits drop drastically include Uniswap, which rose from 11.2 million to 550,000. LINK, is now limited to 45,000.
The proposal was submitted by cuff, a financial modeling platform that uses battle-tested techniques from the algorithmic trading industry to inform on-chain log management. The company made the proposal after extensive deliberation on market and liquidity data.
Voting ended in the early hours of November 29, with users overwhelmingly voting in favor of the proposal. According to that governance forum, more than 470,000 votes were in favour.
Rise in DeFi exploits
This move by Compound Finance was due to the increasing threat of exploits against DeFi protocols, particularly those issuing loans. These exploits pave the way for bankruptcy through uncontrolled liquidation.
Avraham Eisenberg, the man behind the exploit that took place on Mango Markets last month and resulted in a loss of $116 million, is partly to blame for DeFi protocols trying to change their policies. Gauntlet also performed the risk assessment for Spirit. He agreed to a vote shutting down low-liquidity pools to avoid such exploits.
Data from Defi Flame showed that over $60 million has been lost to DeFi exploits since early November.
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