An incident on Blast network involving an Aave fork called Pac Finance resulted in the liquidation of user positions worth over $26 million. The Aave iteration attempted to adjust its loan-to-value parameters but mistakenly reduced its liquidation threshold instead.

According to Will Sheehan, Founder of block explorer Parsec, one user lost up to $24 million in Ether-collateralized positions on the platform. On-chain analytics also showed that participants suffered significant losses denominated in ezETH.

After the issue was brought to light, Pac Finance acknowledged the mistake and stated that affected users were being contacted. The team also mentioned that they were working on a plan to mitigate the error.

In an effort to prevent future mishaps, Aave plans to set up a community forum to discuss upgrades and changes to its defi lending protocol. Pac Finance also intends to deploy a governance contract to enhance transparency and rebuild user trust.

Stani Kulechov, Founder of blockchain developer Avara and the parent company behind Aave, highlighted a fundamental issue with protocol spin-offs. He emphasized the lack of in-depth knowledge of the software and parameters when forking code.

The lending market is a significant sector in the defi space, with lending protocols holding nearly $35 billion in total value locked. Aave leads the market with $11.5 billion in TVL across various chains, including Ethereum, Arbitrum, Polygon, and others. The platform has also introduced its stablecoin GHO to compete with Maker’s DAI token on Ethereum’s blockchain.

Incidents like the one on Blast network serve as a reminder of the complexities involved in the defi space and the importance of thorough understanding when implementing changes. Stay informed and cautious when participating in the cryptocurrency market to avoid potential risks.

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