Cryptocurrencies, like nested Russian nesting dolls, will only continue to harm us. Here's why:
- Yield stacking or leverage loops, such as Terra
- Cross-chain yield farming, such as rsETH
- Leveraged entities use capital to purchase debt from other leveraged entities, each layer relying on the exact same underlying Bitcoin asset, such as Saylor's strategy
- RWA Treasury loops are another problem. See below for details:
• Core Nesting Doll: Institutional providers purchase physical US Treasury bonds and tokenize them into on-chain Treasury tokens (e.g., obtaining a base yield of approximately 5%).
• Second Nesting Doll: Secondary platforms encapsulate these Treasury tokens into "yielded synthetic dollars" (e.g., Ethena's sUSDe or similar assets). They mix Treasury yields with short-term perpetual financing rates, boosting the yield to 15%.
• Third Layer: Investors deposit these synthetic dollars into money market protocols (e.g., Spark or Morpho) and use them as collateral to borrow ordinary stablecoins (USDC/USDT).
• Circular Reaction: Borrowed stablecoins are used to purchase more synthetic dollars, which are then deposited back into the platform.
• Pitfall: While the underlying layer is backed by US Treasury bonds, the upper layers are vulnerable to smart contract code vulnerabilities, cross-protocol oracle failures, and sudden fluctuations in the crypto finance market.
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Anndy Lian
06-27 11:26
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Cryptocurrencies, like nested Russian nesting dolls, will only continue to harm us. Here's why:
- Yield stacking or leverage loops, such as Terra
- Cross-chain yield farming, such as rsETH
- Leveraged entities use capital to purchase debt from other leveraged entities, each layer relying on the exact same underlying Bitcoin asset, such as Saylor's strategy
- RWA Treasury loops are another problem. See below for details:
• Core Nesting Doll: Institutional providers purchase physical US Treasury bonds and tokenize them into on-chain Treasury tokens (e.g., obtaining a base yield of approximately 5%).
• Second Nesting Doll: Secondary platforms encapsulate these Treasury tokens into "yielded synthetic dollars" (e.g., Ethena's sUSDe or similar assets). They mix Treasury yields with short-term perpetual financing rates, boosting the yield to 15%.
• Third Layer: Investors deposit these synthetic dollars into money market protocols (e.g., Spark or Morpho) and use them as collateral to borrow ordinary stablecoins (USDC/USDT).
• Circular Reaction: Borrowed stablecoins are used to purchase more synthetic dollars, which are then deposited back into the platform.
• Pitfall: While the underlying layer is backed by US Treasury bonds, the upper layers are vulnerable to smart contract code vulnerabilities, cross-protocol oracle failures, and sudden fluctuations in the crypto finance market.
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不二.eth
06-09 23:01
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Another major funding round has been completed in the DeFi lending sector, with Morpho securing $175 million.
According to Fortune, Morpho announced the completion of a $175 million funding round, led by a16z Crypto, Paradigm, and Ribbit Capital, with participation from Apollo Funds, Circle Ventures, VanEck, and others. This round was priced based on the token's average price over the past month, valuing the protocol at a maximum of approximately $2 billion.
It's noteworthy that the list of participants—including traditional financial institutions like Apollo and VanEck, along with Circle Ventures—indicates that Morpho is attracting more than just native crypto capital.
Morpho positions itself to allow institutions to customize lending markets and risk parameters on-chain. Its client list itself serves as endorsement: Coinbase, Kraken, Anchorage Digital, and Galaxy Digital are all using it. Its current TVL (TVL) is approximately $6.6 billion.
The key point here is that it directly targets Aave's position. Just days after Aave experienced the rsETH incident and lost tens of billions in TVL, Morpho, on the other hand, is aggressively expanding with new funding and institutional clients, clearly aiming to compete head-on in the institutional lending market.
Institutions want customizable and controllable risk parameters, not standardized protocols with a one-size-fits-all approach. Morpho is betting on this demand.
The second half of DeFi lending is shifting from "who has the largest TVL" to "who can absorb institutional money." Morpho's $175 million investment is aimed at this very goal.
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TheCryptoBasic
06-01 22:20
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The prospects for recovering Kelp DAO funds have worsened, with hackers laundering nearly $220 million.
According to Arkham's blockchain tracking data and on-chain analyst analysis, the majority of the $293 million stolen from Kelp DAO has been transferred, with approximately $220 million laundered in the past six weeks.
Meanwhile, only about $1.7 million of the stolen assets remain in the attacker's wallet. This attack involved a withdrawal of 116,500 rsETH on April 18th, part of a surge in cryptocurrency-related losses that month.
In response, the Arbitration Security Committee froze approximately $71 million on April 21st, but further tracing has become more difficult due to the rapid transfer of funds.
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吴说区块链
05-31 10:06
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Wu learned that Aave released its post-incident investigation report on the April 18th rsETH incident, stating that the Kelp liquidity staking protocol's rsETH LayerZero V2 cross-chain bridge received forged messages during the Unichain-to-Ethereum cross-chain process, causing the Ethereum-side adapter to release 116,500 rsETH, while no corresponding destruction occurred on the Unichain side.
Aave stated that the attack occurred on a third-party cross-chain bridge infrastructure, but the attacker deposited the stolen rsETH into 8 Aave V3 positions and lent out 82,650 WETH and 821 wstETH, impacting the Aave market. Aave stated that the attacker's rsETH on Arbitrum has been destroyed, and the LayerZero OFT adapter has replenished 116,131.72 rsETH in 5 batches, fully restoring rsETH asset backing. The affected WETH and rsETH markets have returned to normal.
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火星财经
05-31 10:03
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🔔Aave Releases Recap of the April 18th rsETH Incident
Mars Finance reports that on May 31st, Aave released a post-incident investigation into the April 18th rsETH incident. The investigation revealed that the Kelp liquidity staking protocol's rsETH LayerZero V2 cross-chain bridge received forged messages during a Unichain-to-Ethereum cross-chain transaction, causing the Ethereum-side adapter to release 116,500 rsETH, while no corresponding destruction occurred on the Unichain side. Aave stated that the attack occurred on a third-party cross-chain bridge infrastructure, but the attackers deposited the stolen rsETH into eight Aave V3 positions and lent out 82,650 WETH and 821 wstETH, impacting the Aave market. Aave stated that the attacker's rsETH on Arbitrum has been destroyed, and the LayerZero OFT adapter has replenished 116,131.72 rsETH in 5 batches. The rsETH asset backing has been fully restored, and the affected WETH and rsETH markets have returned to normal.
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Wu Blockchain
05-28 18:20
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Aave v3 WETH Liquidity Recovers Above Pre-Crisis Levels
According to data from @sealaunch_, since the rsETH security incident in mid-April triggered the Aave liquidity crisis, WETH liquidity in the Aave v3 core market has fully recovered and surpassed pre-crisis levels, once again becoming the most liquid WETH pool in the DeFi space.
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Cointelegraph
05-26 09:21
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🚨 Update: Aave founder Stani Kulechov confirmed that rsETH has been fully restored, the last batch has been sent to the LayerZero lockbox, and all Aave markets have returned to normal.
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火星财经
05-20 22:10
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🔔LayerZero Releases KelpDAO Security Incident Report, Will Adjust Security Strategy and Rebuild Affected Cloud Infrastructure
According to Mars Finance, LayerZero Labs released a report on the KelpDAO attack, confirming that the KelpDAO rsETH cross-chain bridge built on its cross-chain communication protocol was attacked, resulting in the theft of approximately 116,500 rsETH (approximately $292 million). Multiple security organizations, including Mandiant, CrowdStrike, and independent researchers, attributed the attack to the North Korean-related hacking group TraderTraitor (UNC4899). The report shows that the attack began on March 6, 2026. Attackers used social engineering techniques to compromise LayerZero developer accounts, obtain session keys, and infiltrate the RPC cloud environment. They further corrupted internal RPC node data and manipulated the returned results to deceive monitoring systems and the Decentralized Verifier Network (DVN). LayerZero Labs has officially announced adjustments to its security policy, including no longer allowing its own DVN to act as the sole signer in a single authentication configuration, rebuilding affected cloud infrastructure, and introducing short-term credentials, instant permission escalation, and multi-party approval mechanisms to enhance security.
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Hunter Horsley
05-20 14:56
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1) Market events can catalyze the next wave of crypto technology.
This is a result of natural selection.
Last month's $rsETH vulnerability led to changes in the infrastructure of mainstream crypto protocols.
Here's the story of the massive transfer of funds from LayerZero to Chainlink's CCIP 🧵👇