On the 17th of December 2022 The Data Nerd, on Twitter announced that the BNB bridge exploiter would be liquidated for $185 million if the BNB price drops to $200.
Ironically, if the price of $BNB drops a further 20% to $200, the BNB Bridge Exploiter will be liquidated for a total of $185M.
Back in October, it used 900K $BNB as collateral to borrow 150M of stablecoin on @VenusProtocol. pic.twitter.com/r9ssIzNlmM
— The Data Nerd (@OnchainDataNerd) December 17, 2022
Back on October 7th, 2022, a hacker attempted to exploit the Venus Protocol by Minting BNB and opening an overcollateralized position of $254 million, then borrowed $147.5 million against 900k BNB tokens.
The Venus Protocol announced that there was no successful exploit and funds were not lost. Even though the possible bad actor attempted to take advantage of the system, Binance was quick to respond, temporarily pausing activities on the BSC chain.
There were two options to resolve the situation.
One, the borrower refunds the loan and returns all funds to the protocol then the APY will drop back to normal. Two, the bad actor chooses not to refund the loan and disappears with the stablecoins. In that situation, the collateralized BNB would be used to accumulate interest and will slowly get liquidated. Thus, paying back the value of the loan.
All that happened when the price of BNB and the value of the stablecoins were high. With the FTX situation and the price of spot prices of crypto assets across the board, the 20% drop in price which would set BNB to $200 would be the optimal time for the assets to be liquidated and the situation rectified.
But some users have a couple of issues with the situation.
The hacker minted the 900k BNB out of nothing. There’s fear that the collateral could lose value compared to the assets minted by Binance itself, or it could dilute the value of BNB for other users.
Others fear that Venus protocol could have some bad debts. Thus, they might liquidate the collateral to cover up debts, which would amplify the freefall of BNB’s price. A 20% reduction in price is already bad enough, further price falls and liquidations will damage the BNB ecosystem.
There’s also the speculation that CZ of Binance wouldn’t allow Venus to liquidate such a high volume of BNB which brings the situation of Solend of Solana to mind.
Venus Protocol is a decentralized finance money market on the Binance chain any actions by the protocol that would lead users to question the true nature of its decentralization, could lead to FUD, which will lead to mass liquidation and another FTX situation.
Right now, the situation is being monitored.
