Blur

DeFi

Renzo

Read

<div class="protos">
 <a rel="noopener noreferrer nofollow" title="Renzo" href="https://thebittimes.com/tag/renzo.html">Renzo</a> Protocol’s <a rel="noopener noreferrer nofollow" title="liquid" href="https://thebittimes.com/tag/liquid.html">liquid</a> <a rel="noopener noreferrer nofollow" title="restaking" href="https://thebittimes.com/tag/restaking.html">restaking</a> <a rel="noopener noreferrer nofollow" title="token" href="https://thebittimes.com/tag/token.html">token</a> (LRT), <a rel="noopener noreferrer nofollow" title="ezETH" href="https://thebittimes.com/tag/ezeth.html">ezETH</a>, suffered a sharp depeg overnight, in response to an unpopular and misleading <a rel="noopener noreferrer nofollow" title="token" href="https://thebittimes.com/tag/token.html">token</a>omics announcement.
 LRTs are popular with so-called ‘airdrop hunters’ in the decentralized finance (DeFi) sector. Many opt to take on highly leveraged exposure to the ETH-pegged assets to increase their chances of receiving a portion of the project’s own token upon launch.
 However, the announcement faced significant backlash as it revealed that just 5% of Renzo’s REZ token supply was set aside for the initial airdrop (despite the disingenuous use of a not-to-scale pie chart). The image has since been adjusted.
 <figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter">
 <div class="wp-block-embed__wrapper">
 <blockquote class="twitter-tweet" data-width="500" data-dnt="true">
 Oh wow, this is pretty bad from @RenzoProtocol 1st, a large portion of the tokens are going to investors and team 2nd, looks like they’re trying to skew how bad it looks with the design of the pie chart Notice the bottom “half” is 62%, whereas the two 2.5%’s appear to be ~20% pic.twitter.com/1TWIaC9fNI— Blur (@BlurCrypto) April 23, 2024
 </blockquote>
 </div>
 </figure>
 Read more: Blast L2-based lending platform makes costly error, liquidating users for $26M
 Another point of contention was the fact that ‘farmers’ of REZ’s Binance launchpool would recieve 2.5% of tokens two days earlier than ezETH holders, giving plenty of time for them to dump their share before the airdrop recipients.
 The disappointment among ezETH holders led to many moving to unwind their positions.
 The depeg was a result of traders looking to exit their holdings of ezETH, which doesn’t currently allow for direct withdrawals into the underlying assets. Instead, their only option was reportedly via a $200 million liquidity pool on Blast, an Ethereum layer-two network.
 In what is known as a ‘liquidation cascade,’ the leveraged positions that used ezETH as collateral were automatically unwound on DeFi lending platforms. This sell-off of the collateral further depressed the ezETH price, creating a positive feedback loop and resulting in the liquidation of more positions.
 <figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter">
 <div class="wp-block-embed__wrapper">
 <blockquote class="twitter-tweet" data-width="500" data-dnt="true">
 Did @RenzoProtocol ezETH yield loopers on @MorphoLabs just get rinsed? pic.twitter.com/MR5JxuGCCl— djma (@0xdjma) April 24, 2024
 </blockquote>
 </div>
 </figure>
 Read more: Seneca Protocol hack highlights dangers of Ethereum’s token approval mechanism
 The price of ezETH briefly dropped as low as $700 on Uniswap. However, the price oracle by lenders, which averages prices across various markets, reported a much smaller depeg. This had the effect of only liquidating traders that were 5x leveraged or more.
 Liquidations across Morpho and Gearbox (around 10,000 ezETH each) summed over $65 million, reportedly resulting in protocol losses of $34k and $83k, respectively. DeFi security firm Peckshield noted how one unlucky individual lost around $90,000 when their $900,000 position was liquidated.
 Another user lost almost $300,000 to a phishing scam impersonating the official Renzo X (formerly Twitter) account.
 The incident opened a debate over the purpose of DeFi lending platforms as Aave governance delegate Marc Zeller accused Morpho, and its risk advisors Gauntlet, of not doing enough to protect its users.
 Morpho’s Paul Frambot responded that its approach is different to that of Aave, allowing users to set their own risk parameters rather than manage elements such as collateral assets and loan-to-value ratios via DAO governance.
 This is not the first time the two have butted heads. Just over two months have passed since the sudden departure of Aave’s long-time risk advisor Gauntlet, which then joined Morpho days later.
 Got a tip? Send us an email or ProtonMail. For more informed news, follow us on&nbsp;X,&nbsp;Instagram,&nbsp;Bluesky, and&nbsp;Google News, or subscribe to our&nbsp;YouTube&nbsp;channel.
</div>
Source: <a rel="noopener noreferrer nofollow" target="_blank" href="https://thebittimes.com/depeg-of-3b-restaking-token-ezeth-causes-over-60m-in-defi-liquidations-tbt86414.html">https://thebittimes.com/depeg-of-3b-restaking-token-ezeth-causes-over-60m-in-defi-liquidations-tbt86414.html</a>

Depeg of $3B restaking token ezETH causes over $60M in DeFi liquidations

TheBitTimes

Other articles published on Apr 24, 2024

Which Crypto Will Explode in May? Top Picks for Investors

Worldcoin Leads the Charge in Digital Identity and Privacy

Binance Achieves Significant Milestone with 27th Quarterly BNB Burn

Ethereum’s Price Surge and Key Resistance Levels

What’s Behind the Hedera Hashraph HBAR Rally: Black Rock MMF Token Hosted by Archax

Solana Memecoin Bull Run Begins: Bonk, Pepe And dogwifhat Record Nearly 40% Gain

Join our free newsletter for daily crypto updates!