Compound financing executed a proposal to update its price feed, but the move resulted in a code error “which causes trades to rollback for cETH providers and borrowers.” The protocol has submitted a new proposal to bring back the previous version of price feeds, but the process will take seven days, during which the cETH borrowing and lending markets will be frozen.
No Funds at Risk, Says Compound Founder
Interest Rate Protocol Compound Finance reported a code bug that froze the Compound Ether (cETH) borrowing and lending markets for seven days. The bug appeared when Compound ran Proposition 117 to update its price feeds.
“No funds seem immediately threatened. It will probably take seven days before cETH works normally. There will potentially be more governance proposals to rectify the situation.
– Robert Leshner, Founder of Compound Labs
The error prevents users from borrowing or withdrawing collateral, but they will still be able to settle their debts and “add collateral, even Ether collateral,” Compound wrote on Twitter. The bug also caused the interface to stop working, but the protocol expects it to be operational again shortly.
Compound Labs has created a new proposal to return to the previous price stream, but the proposal must undergo a 7-day governance process before becoming effective. The protocol says the code error occurred even though the oracle contract was reviewed by three separate smart contract auditing firms, including OpenZeppelin and ChainSecurity.
OpenZeppelin Security Solutions Architect Michael Lewellen said the bug stems from the “getUnderlyingPrice” function, which failed to update the price feed. Lewellen confirmed that no funds are at risk at this time and that “the rest of the cToken markets on Compound V2 and all of V3 will remain functional”.
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Code error adds to Compound’s 2022 woes
The new bug marks another challenge for Compound this year, which has struggled amid the broader crypto market downturn. Earlier this year, Compound’s Q1 2022 report showed liquidations on the interest rate protocol soared 295% in the three-month period.
Such an increase in liquidated positions comes as investors turned away from crypto due to soaring inflation and the Fed’s aggressive monetary policy tightening. These headwinds have put a lot of pressure on the crypto market, which has lost over a trillion dollars in value in recent months.
Earlier this week, the world’s largest cryptocurrency, Bitcoin, fell below $20,000 following Fed Chairman Jerome Powell’s speech at the Jackson Hole annual conference last week. The head of the US central bank reiterated his commitment to continue to fight inflation by raising interest rates further.
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About the Author
Tim Fries is the co-founder of The Tokenist. He has a B.Sc. in Mechanical Engineering from the University of Michigan and an MBA from the University of Chicago Booth School of Business. Tim was a senior partner on the investment team in the US Private Equity division of RW Baird and is also a co-founder of Protective Technologies Capital, an investment firm specializing in detection, protection and control solutions.