Euler Finance Attack Incident and Its Chain Reaction on the Decentralized Finance Ecosystem

Euler Finance, as an innovative lending protocol in the DeFi space, suffered a hacker attack on March 13, resulting in a loss of approximately $200 million. This incident not only dealt a significant blow to Euler itself but also had a ripple effect on several related projects due to the composability of DeFi, causing chain losses of tens of millions of dollars.

Overview of Affected Projects

1. Angle Protocol

Angle Protocol is a non-USD stablecoin project that primarily offers the euro stablecoin agEUR. An attack has led to an estimated loss of $17.61 million for the project, exceeding its current surplus. The project team has stated that they will compensate agEUR holders, liquidity providers, and hedging token holders proportionally.

2. Balancer

As a decentralized exchange, Balancer has been affected by its Boosted Pools feature, resulting in a loss of approximately $11.9 million. Multiple trading pairs using bbeUSD (Euler Boosted USD) have been impacted, and users can only redeem a portion of their funds.

3. Idle Finance

Idle Finance, as a yield aggregator, has exposure of about $10.99 million on Euler. Its Best Yield Vault and Yield Tranches strategies are both affected.

4. Yield Protocol

The liquidity pool portion of this fixed-rate lending protocol is built on Euler, with expected losses not exceeding 1.5 million dollars. It is worth noting that the borrower's collateral remains unaffected due to being stored within the Yield Protocol.

5. Yearn

Yearn's yvUSDT and yvUSDC strategies have been affected due to the use of Idle and Angle's solutions, with approximately 1.38 million USD at risk. Yearn states that these bad debts will be borne by its treasury.

6. Harvest

Similar to Yearn, Harvest's USDC, USDT, and WETH Vaults are affected due to the use of the Idle strategy. Currently, the project team has not announced a specific handling plan.

7. Inverse Finance

The liquidity of Inverse Finance's dollar stablecoin DOLA on Balancer has been affected, with DOLA Fed losing $860,000 in funds.

8. SwissBorg

This regulated crypto asset management platform lost some ETH and USDT in its Earn strategy, accounting for 2.27% and 29.52% of the subscription funds, respectively. SwissBorg promised to bear all losses.

9. Opyn

Opyn's Zen Bull strategy is affected by potential collateral borrowing on Euler, but the specific loss amount has not been disclosed.

10. Sherlock

As a security partner of Euler, Sherlock has approved a payment of 4.5 million dollars to Euler, of which 3.3 million dollars has already been executed.

11. Sense Finance

Sense Finance, as a fixed-rate lending protocol, is indirectly affected by the fixed-yield assets from projects like Idle.

Summary

The attack on Euler Finance highlights the vulnerability and interdependence of the DeFi ecosystem. While the composability of DeFi offers users a wealth of financial services and higher capital efficiency, it also increases systemic risk. This incident serves as a reminder that, in the pursuit of innovation and efficiency, DeFi projects must place greater emphasis on security and risk management to protect user assets and maintain the healthy development of the entire ecosystem.