If we saw potential collateral risks occur with this rsETH incident, and a glaring hole was exposed with KelpDAO/Aave, what’s to say there won’t be another hack that will affect eUSD’s underlying collateral that is deposited on Aave? Are we/is Reserve working to understand potential future risks of Aave-deposited collateral for eUSD? Seems naive to think this is the final hack to affect Aave.
These “bailouts” of donations and pledged ETH to plug the rsETH hole doesn’t seem sustainable, nor does it seem like it’s a good signal. Similar vibes as “deploying capital, steady lads”.
It’s a great question @Braden, and one I expect most DeFi protocols are actively working through right now.
One point worth highlighting is that even in the aftermath of the rsETH hack and the stress seen on Aave, it remains one of the largest protocols in the space by TVL. While a hit has been taken, market confidence remains strong.
At the basket level, this reinforces the importance of diversification. If an event like this can impact Aave, it can happen to anyone. Diversification is one of the few safeguards, which is why I’m keen to see development of plugins for Morpho V2 vaults for yield DTFs. Bluechip / Prime Morpho vaults we’re relatively unaffected during the recent market stress.
More broadly, I think USD-denominated baskets are still too heavily reliant on lending markets. Both eUSD and USD3 currently sit at 100% exposure. I’ve started exploring alternative sources of yield, such as liquidity provision, and hope to bring something concrete to governors of both DTFs in the near future.