Moonwell Releases Official Statement on Oracle Configuration Error Incident, Governance Proposal for Fix Planned for Launch

Odaily News DeFi lending protocol Moonwell has released an official statement regarding the incident where an oracle configuration error resulted in approximately $1.78 million in bad debt. It confirmed that a critical error in an oracle configuration caused the system to incorrectly calculate the price of cbETH. Instead of using the proper market price, it only utilized the cbETH/ETH exchange rate, leading to a quoted price of around $1.12 for cbETH instead of its actual market price of approximately $2,200. This erroneous price triggered liquidation bots to aggressively liquidate cbETH-collateralized positions. Attackers could liquidate 1 cbETH by repaying only about $1 in debt, resulting in the depletion of collateral for a large number of borrowers and the creation of significant bad debt. Additionally, a small number of users exploited the abnormal pricing to borrow large amounts of cbETH with minimal collateral, artificially inflating the protocol's bad debt. In total, 1,096.317 cbETH was liquidated, most of which constituted bad debt denominated in cbETH. As the oracle fix required a five-day governance voting period and a timelock process, liquidations continued during this interval. The related governance proposal for the fix is now planned for launch.