Pac Finance, a lending app on Blast, has had its users report a $24 million liquidation on April 11 due to a sudden change in parameters by the developer wallet.

Mass liquidations are common for leveraged traders who borrow crypto, but they often occur due to fluctuations in the market, not protocol parameter changes.

Pac Finance LTV Change Leads to Liquidation

Pac Finance is a platform where crypto holders can earn interest by lending their assets. The app implements a loan-to-value ratio (LTV), which limits borrowers to loans equivalent to a certain percentage of their collateral to ensure repayment. Typically, the development team announces changes to the LTV beforehand.

However, on April 11 at 1:06 am UTC, according to Blast network’s blockchain data, a developer wallet changed the LTV for Renzo Restaked Ether (ezETH) to 60% without prior announcement. The sudden adjustment in LTV parameters has sparked concerns within the community following a $24 million liquidation just seconds after the update.

Developer kydo.eth from EigenLabs initially brought light to the information, prompting Pac Finance users to voice their grievances and demand explanations on the protocol’s official Discord server.

We should be grateful that the incident was limited to only a 26m liquidation 🙏

Please, LRT protocols, discourage your users from participating in these protocols⛔️

So what happened?

$26m got liquidated on @pac_finance , a lending protocol on blast.

An EOA wallet (0xae),… https://t.co/76v0tekNmr

— kydo.eth/acc 🦇🔊 (@0xkydo) April 11, 2024

In response, the team’s Discord moderator, Bountydreams, stated they are attempting to contact the team for clarification. However, no response has been received as of writing these lines.

Protocol Change Raises Concerns Over Security Issues

According to smart contract developer Roffet.eth, the parameter change led to the liquidation of many ezETH leveraging farmers since they now violated the protocol’s collateral rules. Roffet criticized the change as “arbitrary,” as it allegedly occurred without warning.

Parsec Finance founder Will Sheehan also condemned the change, noting that it happened without warning. Sheehan estimated that borrowers incurred losses of approximately $24 million in collateral, as their assets were automatically sold off to settle their loans due to the protocol change.

Liquidation threshold was updated, seemingly without warning to trigger these liquidations, 2 blocks later $24m liquidated, h/t to @roffett_eth https://t.co/KLXv5o1Jk9 pic.twitter.com/QXzlFpwKrR

— Will Sheehan (@wilburforce_) April 11, 2024

The incident on Blast adds to a series of security issues within the platform. In early March, Blast’s lending agreement Orbit Lending faced criticism from Key Opinion Leaders (KOLs) for discrepancies in its liquidation threshold. Although the agreement stated an 83% liquidation threshold, it was reported that liquidation occurred at 80%. However, the project later compensated affected users.

In addition, Blast’s ecological project Munchables suffered an attack recently, leading to suspicions of a problem with the locking contract and resulting in the theft of 17,400 ETH (valued at approximately $62.3 million). SomaXBT revealed that Munchables had previously engaged an unknown security team, EntersoftTeam, to issue an audit report to reduce audit fees.

TL;DR

One particular cryptocurrency witnessed a notable price rally following listing on Coinbase.
Such actions from leading crypto exchanges have positively impacted the value of many other digital assets in the past.

Tensor (TNSR) – the native cryptocurrency of the leading Solana NFT marketplace – experienced a significant price boost in the past 24 hours. It briefly surpassed the $2.20 mark, currently trading at around $1.90 (per CoinGecko’s data).

The price spike of nearly 70% came shortly after the cryptocurrency exchange Coinbase enabled trading services with the token. 

“Coinbase customers can log in to buy, sell, convert, send, receive or store these assets,” the company’s announcement reads.

Earlier this month, Coinbase placed TNSR in its “roadmap” zone, where it had to meet certain criteria before receiving an official listing. It also added support for Tensor on the Solana network, advising users to refrain from sending the asset over other networks since “funds may be lost.”

The recently-emerged coin has made serious waves in the crypto space, accounting for a daily trading volume of over $750 million. Thus, it surpassed well-known altcoins such as Cardano’s ADA and Avalanche (AVAX), whose figures stand at $450 million and $535 million, respectively.

Another leading cryptocurrency exchange that embraced TNSR is OKX. It opened deposits and spot trading for TNSR/USDT on April 8, while withdrawals will become available later today (April 9).

Similar moves from trading venues in the past few months have been followed by surging prices of the affected cryptocurrencies. As CryptoPotato reported last month, the gaming token Ronin (RONIN) soared to an almost all-time high price after an official listing on Coinbase. 

Prior to that, Akash Network (AKT) jumped by 20% after the company added it to the “roadmap” section, while Helium Mobile (MOBILE) climbed to a two-month high following the firm’s decision to support it on the Solana network.

The core technical team behind the Filecoin-based STFIL protocol said that they are under investigation by Chinese authorities.

Over the past couple of days, there have been unforeseen updates to the protocol, along with funds transfers to different addresses.

Mysterious Token Transfers and Upgrades

The news came out in a public post by STFIL Protocol on X, revealing that they believe the STFIL core technical team is under investigation by local Chinese police. They mentioned that lawyers have been hired to understand the current situation and provide legal assistance to detained individuals.

We believe that the STFIL core technical team is under investigation by local Chinese police, and we understand lawyers have been hired to understand the current situation and provide legal assistance to the individuals under detention.

Last week, when the core technical team…

— STFIL Protocol 🏔️ (@stfil_io) April 9, 2024

Last week, while the core technical team was detained, FIL tokens on the STFIL platform were mysteriously transferred to an external address, raising red flags among investors and stakeholders.

The transferred funds were tracked to an external address, which the STFIL Protocol has made public in their post. This address currently holds 2.5 million FIL tokens worth approximately $22 million. The post also includes the Protocol’s original address for comparison.

Adding to the situation, there have been reports of abnormal and unscheduled upgrades to the protocol in the past couple of days.

In response to these developments, the STFIL team is actively seeking assistance from the community to track the unknown address and explore measures to safeguard stakeholders’ interests.

Filecoin Mining Pyramid Scheme Case

Meanwhile, In August last year, a Chinese court started proceedings for a case involving a Chinese Filecoin mining company and its four executives, who are accused of organizing an $83.3 million pyramid scheme.

According to local media, Shenzhen Shikongyun Technology and its four executives, including the company’s founder surnamed Lai, are on trial for charges of organizing and leading activities related to a pyramid scheme.

According to prosecutors, the defendants allegedly lured customers by claiming to mine FIL coins on the company’s platform. They claimed that individuals had to meet certain qualifications to participate, such as paying fees for purchasing or leasing mining equipment.

STFIL, a liquid staking protocol built on Filecoin, enables users to earn staking rewards on their FIL tokens while retaining their ability to use them within decentralized finance (DeFi). In exchange for their deposits, users receive liquid staking tokens (LSTs).

According to data from DefiLlama, the platform’s total value locked stands at around $40 million, marking a nearly 60% decrease since the beginning of April.

Several sectors within the crypto market are seeing a resurgence. AI and Big Data, Liquid Staking, and DeFi projects managed to secure the most gains in the past week.

According to their weekly returns, artificial intelligence (AI) and Big Data, which comprised 100 projects, topped the chart with a strong performance and a notable increase of 8.65%, as noted by blockchain intelligence platform Santiment’s latest analysis.

The collective market cap of AI and Big Data currently stands at a staggering $39.3 billion.

🤔 Which #cryptocurrency sectors are thriving and may help your portfolio? Weekly returns:

🎯 AI & Big Data: +8.65%🎯 Liquid Staking: +8.12%🎯 DeFi: +7.76%

Bookmark the @santimentfeed watchlist page, save them to your free account, or create your own: https://t.co/SeW71pQiZy pic.twitter.com/csIk08syUS

— Santiment (@santimentfeed) April 9, 2024

Meanwhile, Liquid Staking, constituting 17 projects, emerged as another promising sector, recording a significant uptick of 8.12% over the past seven days. Its market cap has grown to $43 billion, indicating a growing trend in staking mechanisms amidst a market-wide rebound.
The $111.9 billion DeFi sector encompassing 477 projects, on the other hand, captured the third position on Santiment’s list and recorded an increase of 7.76% during the same period.
Several other sectors have experienced growth in the past week. This includes 85 Layer 1 projects that collectively saw the market cap rise by 7.19% and hovering above $783 billion.
Next up was ERC-20, valued at $708 billion and encompassing 988 projects, which witnessed a combined market cap surge of 6.8% over the past week. The fifth spot was captured by NFTs, with 117 projects registering a 6.47% weekly rise to $17.6 billion in market cap.
Meanwhile, Layer 2, with 22 projects under its belt, stood at the sixth position with a 5.9% increase.
Social, meme coins, and Gaming sectors also showed significant growth this week with 5.73%, 5.59%, and 4.24% surge in their respective market caps.

DeFi market maker Swaap Finance has launched a new service called Swap Earn, allowing users to earn an extra yield on already yield-bearing assets.

The protocol tops up investor returns through market-making yield, spreading investors’ assets across multiple pre-defined protocols.

Yield On Top Of Yield

Market making is when DeFi users provide liquidity to decentralized exchanges, allowing fellow crypto buyers to easily find sellers, and vice versa. Market-making yield can come from one of two sources: trading/swap fees, or intrinsic token rewards.

Per a press release shared with CryptoPotato, Swaap Earn liquidity providers earn “superior yield” by depositing their assets into single asset vaults. Assets are then dynamically distributed across multiple protocols in search of the most optimal yield at any given time.

The model provides investors with returns that are passive, but also trust minimized. Over time, Swaap’s decentralized governance can add new allocation rules and strategies to keep yields as high as possible.

“The beauty of Swaap Earn lies in its simplicity and efficiency,” said David Bouba of Swaap Labs. “By marrying our cutting-edge market-making strategies with passive yield generation, we’re setting a new standard for liquidity utilization in the DeFi space.”

Swaap’s Continued Growth

The first vaults on Swaap Earn were developed in conjunction with Lido and Aave. with Aave providing a grant Lido is the world’s largest DeFi protocol providing investors with Liquid staking assets like Staked Ether (stETH), while Aave is a lending protocol with $11.8 billion under management.

According to Swaap, revised fee structures among popular AMMs have made sustainable yields harder to come by within DeFi.

“Despite progress in strategy and risk mitigation, issues such as poor strategy design and liquidation risks persist,” wrote the team. “Swaap Earn was created to solve these challenges while increasing the returns available to LPs.”

One year ago, Swaap Labs closed a seed funding round for $4.5 million led by Signature Ventures, with participation from CoinShares CSO Meltem Demirors. Swaap v2 launched in July 2023, which brought advanced autopilot market trading strategies to all users for the first time.

A recent report by Coinbase Research uncovered that restaking has emerged as the second-largest sector in decentralized finance (DeFi) on Ethereum.

The study highlights EigenLayer’s restaking protocol as an important component for new services and middleware on the Ethereum network, potentially offering significant ETH rewards for validators in the future.

EigenLayer’s Restaking Protocol

Ethereum’s proof-of-stake (PoS) consensus mechanism is the largest economic security fund in the crypto space, with nearly $112 billion. While validators securing the network traditionally earned base rewards on locked-up ETH, the introduction of liquid staked tokens (LSTs) paved the way for participants to engage with DeFi by trading or leveraging their staked assets.

EigenLayer’s restaking protocol, launched on Ethereum mainnet in June 2023, has quickly grown to become the ecosystem’s second-largest DeFi protocol by total value locked (TVL), currently at $12.4 billion.

This protocol enables validators to earn additional rewards by securing actively validated services (AVS) by restaking their staked ETH and introducing a new income stream known as “security-as-a-service.”

As EigenLayer prepares to launch its first AVS, EigenDA, in early Q2 24, the Ethereum community anticipates its potential benefits to the network. EigenDA’s role as a data availability layer could impact layer-2 (L2) transactions, offering a modular solution for reducing fees and enhancing efficiency.

The report predicts initial earnings from EigenDA by comparing it to Ethereum’s blob storage expenses. Major Layer-2 solutions currently spend about 10 ETH daily on blob transactions. If EigenDA experiences similar usage levels, the projected yearly restaking rewards of around 3.5k ETH will amount to roughly 0.1% in additional earnings.

Risks and Complexities

While introducing AVSs can strengthen Ethereum’s ecosystem, it also comes with challenges. Each AVS sets its own slashing and claims conditions, leading to potential conflicts if multiple AVSs are involved. The “pooled security” model of EigenLayer further complicates matters, allowing AVSs to customize their security with “attributable security,” creating a complex technical landscape for operators.

Introducing Liquid Restaking Tokens (LRTs) takes away most of this complexity from token holders, potentially leading to hidden risks. LRT providers may prioritize maximizing yields to gain market share, potentially increasing the risk profile. LRTs could also create downward sell pressure on non-ETH AVS rewards if payouts are in ETH, limiting value accrual for restaking.

LRTs also carry valuation risks, with potential dislocations from their underlying value during periods of high staking withdrawal. Proper assessment of LRTs’ collateral value becomes crucial, as shifts in portfolio holdings or AVS earnings could impact their risk profile. In extreme scenarios, faults in the restaking mechanism could threaten Ethereum’s consensus protocol.

Decentralized applications (dApps) saw a rise of 77% in activity in the first quarter of 2024 and a 7 million total daily active user wallet count.

This growth comes as Bitcoin hit an all-time high in Q1 2024, reaching above $73,000.

DApp Activity Resurges

According to DappRadar, the recent increase in new users shows a strong recovery, indicating the end of the longest bear market experienced.

The growth has been attributed to the approval of U.S. spot Bitcoin exchange-traded funds (ETFs), which sent BTC to multiple new all-time highs.

DappRadar also noted the renewed interest in non-fungible tokens (NFTs) throughout 2023, following a drop in usage in 2022. The unique active daily users’ wallet counts surged to 4.8 million in 2023, doubling from 2022. In addition, NFTs had the most growth, 166% over the previous year.

This strength has remained well into 2024, with DappRadar noting a 50% surge in trading volume to $3.9 billion and a 13% increase in sales to $11.6 million in Q1 2024.

Blockchain gaming continues to lead in Web3, commanding a 30% dominance and attracting about 2.1 million daily unique active wallets, a 59% increase from last quarter. NFT gaming collections also performed well, with the highest sales in Q1 2024 being Gods Unchained with 1 million, Axie Infinity with 459K, and Arena of Faith with 19.5K.

However, in the first quarter of 2024, the social vertical became the frontrunner in the sector’s growth with a 324% surge in active wallets. While decentralized finance, gaming, and NFTs performed well, the increase in social media dApps could show an emerging trend in the industry.

Hacks and Exploits Remain Persistent

In the first quarter of 2024, the blockchain space experienced a loss of $407 million due to hacks and exploits. While the amount was a 32% decrease from Q4 2023, compared to the first quarter of 2023, it is an increase of 9%, showing that security challenges persist.

Ethereum led, accounting for 57% of the total losses, followed by BNB Chain at 17% and Arbitrum at 14%. Other chains collectively constituted the remaining 12%.

Ripple co-founder Chris Larsen’s Ripple chain account was compromised, leading to a loss of 213 million XRP tokens valued at around $112.5 million. Another incident was with the hacked Munchables protocol, which led to a loss of 17.4k ETH, equal to $62.5 million. Additionally, the exchange sector was hit after BitForex was implicated in an exit scam with suspicious outflows amounting to $56.5 million across multiple blockchains.

On April 3, 2024, ZachXBT revealed that Kyle raised alarm bells in his Discord server, claiming his wallets had fallen victim to a hack.

The prominent blockchain investigator’s findings instead strongly suggested a deliberate transfer of funds rather than an external hack.

Kyle Accused of Faking Hack

While investigating an alleged hack involving a “social gamer,” Kyle, and a less-known NFT project called ‘NuddiesNFT,’ ZachXBT found a disturbing narrative of lies and deception. However, the popular on-chain sleuth uncovered a different story.

Within hours of the purported hack, 94 SOL tokens worth around $12,000 were traced to an exchange deposit address. He then found a destination transaction for 3.42 ETH, worth around $11.7K using time analysis.

The Ether was then used to purchase high-value NFTs, notably DeGods 2921 & y00t 10991, which were promptly transferred to Kyle’s public ENS address.

Kyle reportedly blatantly flaunted the ill-gotten gains, featuring the DeGods NFT as his profile picture on social media platforms. This brazen display is compounded by their post-hack behavior, where they shifted gears to share motivational quotes in Discord, seemingly oblivious to the blockchain’s indelible record of his actions.

ZachXBT’s latest investigation, however, serves as a sobering reminder of the transparency inherent to blockchain technology despite the rampant scams and rug pulls.

Shortly after ZachXBT’s post, Kyle deleted his X (formerly Twitter) account.

As for NuddiesNFT, the project said that its creator wallet was replenished with $12K. The private keys, on the other hand, were entrusted to two community members. After removing Kyle, new owners were also roped in to monitor the project.

While certain investors remained hopeful about the project, others claim that Nuddies is yet another fraudulent NFT project that would rug pull soon.

ZachXBT Unmasking Frauds

ZachXBT has been exposing popular influencers for promoting questionable tokens and projects, investigating suspicious activity, and exposing fraudulent entities since 2021. His targets range from Crypto Rover, BitBoyCrypto’s Ben Armstrong, Lark Davis, DannyCrypt, and many more.

The detective even pointed a finger at American YouTuber Logan Paul.

Amidst improved investor sentiment, blockchain security firm PeckShield’s report for March 2024 revealed a concerning surge in crypto hacks, with over 30 incidents causing approximately $187.29 million in losses.

Despite these setbacks hindering progress in the DeFi sector, the community can find some solace in the recovery of almost $99 million during the same period. In fact, the latest figure also marks a significant 48% decrease from the previous month, February 2024.

Among the most devastating breaches, Munchables, a Web3 gaming protocol on the Blast network, appears to have topped the chart after suffering an exploit that resulted in losses of $97 million.
Surprisingly, the hacker voluntarily returned the funds without requesting any ransom. He was later identified as an insider with the alias “Werewolves0493” on GitHub, who shared the private keys holding the funds to the team without conditions.
This was later confirmed by Blast founder Pacman, who said that the network’s core contributors successfully secured the entire stolen stash.
Meanwhile, the smart contract exploit of real-world asset (RWA) liquidity firm Curio Network followed closely behind with $40 million in losses due to a flaw in the voting power privilege access control.
Other significant incidents pointed out by PeckShield include the decentralized finance (DeFi) protocol Prisma Finance, which lost almost $11.6 million and is currently under negotiation.
The Binance-incubated platform NFPrompt hack stands next with $10 million in damages.
The WooFi incident was PeckShield’s fifth spot, accounting for $8.5 million in losses. An investigation by experts revealed that the DeFi platform’s swap feature on the Arbitrum network was targeted.

Prisma Finance’s hacker, who stole $11.6 million from the decentralized finance (DeFi) protocol, claims the exploit was a “whitehat rescue” and is enquiring who to contact to refund the funds, according to on-chain messages.

A white hat hacker tries to find security vulnerabilities in software code using their hacking skills.

Attacker Claims ‘Whitehat Rescue’ Before Moving Funds

Six hours following the Prisma Finance hack, the attacker sent a message claiming it was a “whitehat rescue” aimed at helping the platform, according to blockchain analytics firm Etherscan.

The attacker then inquired how to return the funds to the protocol using the address “0x2d4…7507a,” previously identified as one of those linked to the attack. In response, about two hours later, Prisma Finance provided contact information for negotiations.

According to estimates by blockchain security firm PeckShield, 3,257.7 ETH was stolen and sent to three separate addresses.

#PeckShieldAlert The attack is ongoing, with the total loss now increased to ~3,257.7 $ETH (worth ~$11.6 million)To vault owners, please follow up on notifications from the official source and be cautious about scams pic.twitter.com/5HYGYCROIP

— PeckShieldAlert (@PeckShieldAlert) March 28, 2024

Despite the claim of good intentions, blockchain security firm Cyvers mentioned that the attacker swapped the stolen funds for Ether (ETH) shortly after the message. PeckShield also later detected a transfer of around 200 Ether to OFAC-sanctioned Tornado Cash, a cryptocurrency mixer known for obscuring transactions and funding sources, which is often used for illicit activities.

In response to the exploit, Prisma Finance has halted its DeFi protocol and is currently investigating the root cause of the attack. The move impacted the platform, with the total value locked on their protocol plunging from $220 million to $107 million, according to DeFiLlama.

Majority of Crypto Losses Stem from Hacks, Not Fraud

According to Immunefi, a web3 security firm, over $200 million in crypto has already been lost to hacks and scams in the first two months of 2024 across 32 individual incidents. In 2023, there was a total loss of $1.8 billion to hacks and scams, with 17% linked to the North Korean Lazarus Group.

Most funds lost were due to hacks rather than fraud. Only $103 million was lost from clearly identifiable fraud schemes, such as rug pulls, while over $1.6 billion was lost from hacks and exploits. Of these losses, $1.3 billion occurred in protocols claiming to be decentralized, while only $409 million was lost from centralized finance (CeFi) crypto protocols.

In response to these developments, the Prisma Governance Token (PRISMA) experienced a 30% drop to $0.244 after the news. However, it has since rebounded to $0.28, according to data from CoinGecko, down 35% over the last week.