Euler attack chain reaction: Multiple projects in the DeFi ecosystem suffer losses.

In the later stages of DeFi Summer, Euler Finance emerged as one of the few innovative DeFi projects. Its uniqueness lies in categorizing assets into different tiers based on risk, with each tier having specific lending permissions. However, on March 13, an unfortunate hacking incident occurred, resulting in a loss of approximately $200 million.

As a foundational lending protocol, the security of Euler is particularly important. Due to the composability feature of DeFi, this attack affected multiple DeFi projects, resulting in tens of millions of dollars in collateral damage.

Angle Protocol is a decentralized non-USD stablecoin project that primarily issues the euro stablecoin agEUR. Users can mint agEUR in two ways: first, by exchanging stablecoins like USDC at a 1:1 ratio, with price volatility risk borne by hedging agents; second, by over-collateralizing with assets like WETH. To enhance project returns and incentivize token holders, Angle has designed yield strategies based on Yearn, using collateral to generate yield. Euler is one of the main destinations for these strategies.

In this attack, Angle estimates a loss of 17.61 million dollars. Despite having a surplus of 5.58 million dollars, it is still unable to make full payments. agEUR holders, liquidity providers, and hedge token funds will be compensated proportionally overall. Users who minted agEUR through the lending module can still repay their loans and redeem their collateral.

A certain DEX suffered a loss of 11.9 million USD due to bbeUSD (Euler Boosted USD). The platform launched Boosted Pools in December 2021, innovating to enhance LP yields and simplify user access to other protocols. Part of the funds is deposited into lending protocols, while the remainder is used for trading. In the Boosted Euler USD pool of a certain DEX, users can deposit three mainstream stablecoins, and the platform will deposit the funds into Euler and issue LP tokens bbeUSD. bbeUSD can be paired with other tokens to participate in liquidity mining.

A certain DEX has increased the risk of loss while promoting the use of bbeUSD. Apart from the Boosted Euler USDC pool, the four trading pair LPs using bbeUSD can only partially redeem their funds.

Idle Finance is a yield aggregator that offers three yield strategies. Junior Tranches have higher risks and returns and may bear losses before Senior Tranches in the event of a security incident. Idle Finance automatically deposits funds into multiple projects to generate yields and reinvest. Due to its preference for high-yield strategies, Euler is an important partner. Currently, the Best Yield Vault and Yield Tranches have exposures to Euler of approximately $5,327,100 and $5,662,800, totaling about $10,990,000.

Yield Protocol is a fixed-rate lending protocol that operates similarly to zero-coupon bonds. Depositors receive fyTokens, which can be redeemed for the underlying asset on a 1:1 basis at maturity. Its liquidity pool is built on Euler, with a portion of the funds deposited in Euler and part held as fyTokens. The portion deposited in Euler is affected, with pre-attack deposits expected to be no more than $1.5 million. Borrowers' collateral remains unaffected as it is stored within Yield Protocol.

A certain yield aggregator stated that its yvUSDT and yvUSDC have a $1.38 million risk exposure to Euler due to the use of Idle and Angle strategies. The resulting bad debt will be borne by the project, and all Vaults will continue to operate normally.

Another yield aggregation platform called USDC, USDT, WETH Vault is affected by the use of Idle. A solution has not yet been announced, and users are advised to pause interactions with these Vaults.

A decentralized stablecoin project’s USD stablecoin suffered losses in the DOLA/bbeUSD trading pair on a certain DEX. The project stated that despite taking proactive measures to mitigate the losses, there are still $860,000 in funds affected.

A certain cryptocurrency asset management platform stated that its Earn strategy incurred losses in the ETH and USDT portions, including 1617.23 ETH and approximately 1.69 million USDT, which accounted for 2.27% and 29.52% of the subscribed funds, respectively. The platform will bear all losses.

The Zen Bull strategy of a certain decentralized options protocol has been affected. This strategy combines the Crab strategy and leveraged long positions in ETH, suitable for low-volatility markets with an upward trend in ETH prices. Since the strategy requires collateral assets to leverage purchase ETH, it may result in losses due to collateral borrowing in Euler. The amount of loss and the handling plan have not been disclosed yet.

A certain DeFi security provider previously reached a cooperation of 10 million USD with Euler, responsible for smart contract auditing and insurance. After the attack occurred, the provider voted to compensate Euler with 4.5 million USD and executed a payout of 3.3 million USD.

A certain fixed-rate lending protocol has been indirectly affected by trading Idle and other fixed-income assets.