Pac Finance – a lending protocol and an Aave fork on the Blast Network – saw a large number of liquidations on April 11 after the platform suddenly lowered the liquidation threshold for user positions.
“The arbitrary Aave fork on Blast lowered the liquidation threshold (LT) instead of the loan-to-value (LTV), causing $26 million in unnecessary liquidations,” says Stani Kulechov of Avara, the maker of Aave . said on X while reposting news of the liquidations.
The developer wallet adjusted a feature on Pac Finance’s PoolConfigurator-Proxy contract that lowered the liquidation threshold of Renzo Reinvested Ether (ezETH) loans without prior notice or time slot, resulting in large liquidations.
Lowering the liquidation threshold in a lending platform can cause an increase in liquidations due to the smaller margin of safety it offers borrowers.
“A fundamental problem with forking code is the lack of in-depth knowledge of the software and its parameters,” Kulechov said.
Crypto analyst 0xLoki noted that 93% of liquidations were carried out by one address (0x..db3d), which subsequently profited approximately 244 ETH from the event.
Pac Finance informed X that it is aware of the issue and is in contact with affected users. It too claims to “actively develop a plan with them to mitigate the problem.”
“In our effort to adjust the LTV, we commissioned a smart contract engineer to make the necessary changes,” the platform explains. “However, it was discovered that the liquidation threshold was unexpectedly changed without prior notice to our team, which led to the current issue.”
“Going forward, we will establish a governance contract/time slot and forum for all future upgrades to ensure discussions are planned in advance,” it added.
Disclaimer: Larry Cermak, CEO of The Block, is an angel investor in Blast.
