The compound has authorized the suspension of four assets with inadequate market liquidity.
Protocol for decentralised credit provision Compound suspends the usage of four tokens as collateral for lending on the platform. In order to defend itself from market manipulation assaults, the protocol will prohibit users from depositing these assets and obtaining loans.
On Monday, the governing members of Compound adopted Proposal-131, which requested that assets with poor liquidity not be utilised as loan collateral. 0x (ZRX), basic attention token (BAT), maker (MKR), and yearn finance (YFN) are the tokens (YFI). With 554 126 votes in favour or 99.99% of the total votes cast, the motion was approved by the members with overwhelming support. Only one voter was opposed to the idea.
The proposal indicated that the four assets had poor liquidity characteristics. The prices of low-liquidity assets are readily manipulable. The suggestion follows a $114 million price manipulation assault on Mango Markets, a popular loan market on Solana, earlier this month.
In reaction to the Mango exploit, Compound creator Robert Leshner, who voted in support of Proposal-131, said on the Unchained Podcast that lending methods should examine their risk boundaries. It was a wake-up call for lending processes, including Compound Finance, he noted. An external audit of the Compound Finance software revealed that specific tokens might possibly be used to steal cash.
Governance members of Aave, the biggest Ethereum-based lending system, have been engaged in a similar issue. Chaos Labs, a crypto risk management organization, has proposed that ren (REN) and 0x protocol (ZRX) not be used as collateral assets on Aave immediately. Aave has not yet proposed a vote to deactivate the collateral assets in question.