The DeFi Ecosystem Under Attack: The Euler Finance Incident and Its Ripple Effects

Euler Finance, as an innovative project in the Decentralized Finance space, has garnered attention for its unique asset layering mechanism. However, a security incident that occurred on March 13 resulted in a loss of approximately $200 million, affecting not only Euler itself but also several related DeFi projects.

As a foundational lending protocol, the security of Euler is crucial. Due to the interconnectivity of the DeFi ecosystem, this attack has severely impacted multiple projects, with total losses reaching tens of millions of dollars.

Angle Protocol is a decentralized stablecoin project that primarily issues the euro stablecoin agEUR. It provides two ways to mint agEUR through its core module and lending module. To enhance yield, Angle employs a strategy similar to Yearn, using collateral to generate returns. In this incident, Angle estimates a loss of approximately $17.61 million and will compensate users proportionally.

Balancer, as a decentralized exchange, suffered a loss of approximately $11.9 million due to bbeUSD (Euler Boosted USD). Its innovative Boosted Pools aim to enhance yields for liquidity providers but also increase risk exposure. In addition to the main pool, several trading pairs using bbeUSD were also affected.

Idle Finance is a yield aggregator that offers various yield strategies. Due to depositing a large amount of funds into Euler, Idle Finance suffered a loss of approximately $10.99 million in this incident, affecting its Best Yield Vault and Yield Tranches.

Yield Protocol, as a fixed-rate lending protocol, has part of its liquidity pool built on Euler. It is expected that the funds deposited in Euler were less than $1.5 million before the attack occurred. Fortunately, the borrower's collateral was unaffected.

Other affected projects include Yearn, Harvest, Inverse Finance, SwissBorg, Opyn, and Sense Finance. These projects have direct or indirect financial ties with Euler to varying degrees, and thus have suffered losses.

It is worth noting that Sherlock, as a provider of DeFi security services, had previously reached a cooperation with Euler. After the incident, Sherlock proposed to compensate Euler with $4.5 million and has executed part of the compensation.

This event highlights the potential risks brought about by the interconnectedness of the DeFi ecosystem and reminds project parties and users to be more cautious in assessing and managing risks. In the future, the DeFi industry may need to seek a better balance between innovation and security.