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DeFi Lender Compound Tightens Borrowing Limits After Aave Exploit Attempt

Decentralized lending protocol Compound Finance passed a proposal to impose loan limits and introduce new borrowing caps to lower risk on its platform.

The community voted overwhelmingly in favor of introducing or lowering the maximum borrowing amount for 10 cryptocurrencies, including wBTC, LINK and UNI.

“Setting borrow caps helps avoid high-risk attack vectors while sacrificing little capital efficiency and allowing for a threshold of organic borrow demand,” the proposal read.

The voting concluded on Monday and it is in the queue for execution at press time.

The passed proposal introduces borrow caps for five cryptocurrencies and sets stricter loan limits for another five. (Compound Finance)
The passed proposal introduces borrow caps for five cryptocurrencies and sets stricter loan limits for another five. (Compound Finance)

Compound’s action comes after an alleged exploit attempt on Aave – a rival lending platform – brought scrutiny to any potential vulnerabilities in decentralized finance (DeFi) protocols’ lending mechanism.

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The exploiter, who appeared to be infamous DeFi trader Avi Eisenberg, borrowed large sums of illiquid CRV tokens on Aave in an attempt to create bad debt on the protocol. Aave froze borrowing in 17 crypto assets Monday to mitigate risk from potential attacks before its network upgrade.

Eisenberg became known for his self-described “highly profitable trading strategy” exploiting a loophole on Solana-based Mango Markets, draining $114 million from the protocol last month.

Read more: $114M Mango Markets Exploiter Outs Himself, Returns Most of the Money