Prisma Finance Receives Strong Community Support for Restarting Protocol with DAO Approval
Hassan Shittu
Updated: April 5, 2024 11:01 EDT | 2 min read
Prisma Finance has revealed its cautious plan to resume operations following a hack that resulted in an $11.6 million loss and led to a temporary suspension of the platform on March 28.
The reinstatement of borrowing capabilities on Prisma relies on achieving consensus through an ongoing community vote.
Prisma Finance Falls Victim to $10 Million Exploit: Recovery Efforts and Governance Response
On March 28, the decentralized finance (DeFi) protocol, Prisma Finance, was exploited, resulting in the theft of approximately $10 million worth of cryptocurrencies. The exploit on Prisma Finance was carried out through a flaw in the migration zap contract, leading to a total loss of around $11.6 million.
The migration zap contract was originally designed to manage transitions between trove managers but was manipulated to extract assets, including wrapped-staked Ethereum (wstETH). The stolen assets were quickly converted to Ethereum (ETH), making it difficult to track and recover the funds.
The protocol assured that the core functionality of Prisma Finance was unaffected. The issue was confined to a specific component, the migration zap contract, and did not compromise the overall protocol.
In response to the breach, Prisma Finance implemented an emergency pause on all trove managers. This action halted all borrowing activities and prevented new liquidity from entering the protocol, with the aim of stabilizing the situation. However, the Prisma Finance DAO launched a four-day governance vote the following day, which will conclude on April 7.
Source: snapshot.prismafinance.com
As of the latest update, the proposal to resume borrowing activities on Prisma has received unanimous support, with a 100% “Yes” vote from participating DAO members, indicating strong community backing. However, the final decision will be made after the voting deadline.
Users are strongly advised to revoke delegate approvals for open positions, as the protocol’s resumption may carry the risk of fund loss. Previously, the protocol identified 14 accounts that had not yet revoked the affected smart contract, potentially exposing them to a combined loss of $540,000.
Plans to Restart Borrowing Activities After Exploit
Source: gov.prismafinance.com
On April 3, core contributor Frank Olson presented a plan to safely unpause the Prisma protocol, thereby reinstating functionalities such as the ability for users to deposit liquid staking tokens (LSTs) and liquid restaking tokens (LRTs), as well as borrow overcollateralized stablecoins.
Olson emphasized the importance of unpausing the protocol, stating that it is crucial for the recovery process and the restoration of normal operations, including full Vault management and deposits into the Stability Pool. He also highlighted Prisma’s ongoing commitment to enhancing security measures, which includes continuous auditing services, bug bounty programs, and overall security improvements.
Significantly, in a forum post by Frank, Prisma Finance outlined its immediate response and upcoming steps following the hack.
To address the exploit, Prisma Finance has proposed several key measures. Firstly, there will be a substantial reduction in protocol-owned liquidity (POL) by decreasing the weekly POL amount from $40,000 to $0. Additionally, the distribution to stakeholders will be affected, with the weekly amount allocated to vePRISMA holders being halved from $160,000 to $80,000.
Frank emphasized that these proposed changes are not permanent but are necessary at present. He stated,
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