The loan taken out on Venus Protocol by the NBB Smart Chain hacker in the autumn of 2022 is now on the verge of being liquidated. As a result, around $200 million of BNB collateral is at risk. Let’s take a closer look.
$150 million is about to be liquidated on Venus Protocol
Several months ago, in the autumn of 2022, a hacker carried out an impressive theft on the BNB Smart Chain, leading to a loss of more than 2 million BNB for more than $560 million at the time. To counter this, the validators implemented controversial emergency measures, including shutting down the blockchain and a hard fork.
To carry out his deed, the attacker borrowed around $147.5 million in stablecoins from the Venus Protocol lending and borrowing application, which he collateralised with nearly 935,000 BNB.
But in recent days, the ecosystem has experienced considerable volatility due to the regulatory crisis in the United States, and BNB has not been spared, with a loss of nearly 17% in the last 7 days alone.
As a result, the hacker’s position on Venus Protocol has been severely downgraded, and according to DefiLlama data, if the BNB were to fall below $220.067 per unit, the liquidation of the more than $200 million in collateral would begin.
A situation under control
With such amounts at stake, a liquidation could lead to a significant fall in the BNB, triggering cascading liquidations, creating a vicious circle. To avoid this, a governance proposal was launched in November 2022, so that if liquidation were to occur, it would be carried out manually to limit the impact on share prices.
As a result, an address had been whitelisted, giving exclusivity to the BNB Chain’s central team to carry out the liquidation in collaboration with “Binance and other players” if necessary. This was confirmed again this morning:
According to the governance proposal below, the BNB Chain core will take over the $BNB position on Venus if the BNB price hits the liquidation threshold. https://t.co/MSUHLUTwTS
– BNB Chain (@BNBCHAIN) June 12, 2023
In preparation for this eventuality, Venus Protocol teams have indicated that the address in question has begun to be provisioned for the operation:
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“The whitelisted portfolio was initially funded with $30 million in USDT with the assurance of avoiding a shortfall on Venus and providing additional support through this mechanism approved by Venus governance. “
So, if liquidation were to occur, it would be frictionless. Nevertheless, while this is done “for a good cause”, it highlights once again the strong centralisation of the BNB Smart Chain ecosystem and its dependence on Binance, while the core value of a blockchain is supposed to be immutability for better or worse.
