DeFi ecosystem suffers a heavy blow: Euler Finance attack incident triggers a chain reaction

Euler Finance, as an innovative project in the Decentralized Finance space, has attracted significant attention due to its unique asset layering design. However, the hacking incident that occurred on March 13 resulted in losses of approximately $200 million for the project, which not only dealt a massive blow to Euler Finance but also impacted multiple related projects due to the composability of DeFi.

In this incident, at least 11 DeFi projects suffered varying degrees of losses. Among them, Angle Protocol estimated a loss of $17.61 million, Balancer lost $11.90 million due to bbeUSD, and Idle Finance had an exposure of $10.99 million. In addition, projects such as Yield Protocol, Yearn, Harvest, Inverse Finance, SwissBorg, Opyn, Sherlock, and Sense Finance were also affected to varying extents.

Angle Protocol, as a decentralized stablecoin project, has part of its agEUR stablecoin collateral stored on Euler, resulting in significant losses. Although the project has some surplus, it is still insufficient for full compensation. Balancer, as a DEX platform, has exacerbated the losses with its innovative Boosted Pools feature. Idle Finance, acting as a yield aggregator, suffered severe setbacks after opting for high-yield strategies and depositing a large amount of funds into Euler.

The liquidity pool section of Yield Protocol is built on Euler, with expected losses not exceeding $1.5 million. Yearn and Harvest are at risk due to strategies involving Euler, with some funds facing exposure. Inverse Finance's DOLA liquidity on Balancer has been affected, resulting in a loss of $860,000. The ETH and USDT in SwissBorg's Earn strategy have also encountered partial losses.

Opyn's Zen Bull strategy may be affected due to collateralized lending on Euler, with specific losses yet to be disclosed. Sherlock, as Euler's security partner, has agreed to compensate $4.5 million, of which $3.3 million has already been executed. Sense Finance has been indirectly impacted due to transactions involving assets like Idle.

This incident highlights the vulnerability and interdependence of the DeFi ecosystem. Although innovation brings infinite possibilities to DeFi, it also increases potential risks. Various projects are actively taking measures to mitigate losses, while this incident serves as a wake-up call for the entire DeFi industry, calling for enhanced security measures and risk management.