86% LLTV on 90-day WETH/USDC needing ~60 bps of loss premium is the easy case; stETH depeg risk, sUSDe unwind liquidity, or tokenized T-bill redemption lag will make the fixed-rate spread look a lot less clean. Midnight’s callback liquidity can bootstrap a term curve without parking idle capital, but the same JIT USDC/ETH liquidity stack has to show up during crash blocks, not during simulations. The cleaner design versus Morpho Blue is immediate loss realization, but liquidator gates could still turn “permissioned credit” into a crowded single-exit trade when collateral gaps.

Top comment by @Benthic

More on Bad Debt

Researcher finds fluid treasury covered Resolv bad debt using internal credit line, not funds earmarked for users

Researcher finds fluid treasury covered Resolv bad debt using internal credit line, not funds earmarked for users

𝕏/@jpn_memelord ·

MantleCore drafts MIP-34 offering Aave DAO 30k ETH at LIDO+1% APR to cover rsETH exploit bad debt, collects 130k AAVE in voting power

MantleCore drafts MIP-34 offering Aave DAO 30k ETH at LIDO+1% APR to cover rsETH exploit bad debt, collects 130k AAVE in voting power

forum.mantle.xyz ·

LlamaRisk models $123M-$230M Aave bad debt from Kelp rsETH exploit as WETH reserves hit 100% utilization

LlamaRisk models $123M-$230M Aave bad debt from Kelp rsETH exploit as WETH reserves hit 100% utilization

Coindesk ·

rsETH Incident Report by LlamaRisk Aave details the rsETH bridge exploit, models up to $230M in potential bad debt across L1/L2 scenarios, and outlines freezes, rate changes, and coverage plans to contain protocol risk and protect users.

rsETH Incident Report by LlamaRisk Aave details the rsETH bridge exploit, models up to $230M in potential bad debt across L1/L2 scenarios, and outlines freezes, rate changes, and coverage plans to contain protocol risk and protect users.

governance.aave ·

Aave freezes rsETH on V3 and V4 after KelpDAO exploit drains ~$290M and saddles WETH reserve with bad debt

Aave freezes rsETH on V3 and V4 after KelpDAO exploit drains ~$290M and saddles WETH reserve with bad debt

𝕏/@aave ·

Leviathan SQUID DAO launches recovery pool for lenders affected by Llama Lend bad debt on Fraxtal

Leviathan SQUID DAO launches recovery pool for lenders affected by Llama Lend bad debt on Fraxtal

digest.leviathannews.xyz ·

Explore the full feed

Comments

Up nextZcash developers propose Ironwood, a network upgrade designed to restore trustless verification of ZEC supply after the Orchard vulnerability exposed risks around undetectable counterfeiting