- Yearn reported an incident involving its yUSND vault on the Arbitrum network due to limited USND liquidity causing severe slippage.
- The event affected the rETH Stability Pool Strategy, holding 28% of the vault’s assets, resulting in losses exceeding $25,000.
- Yearn covered all losses, ensuring user principal was protected while yield potential was impacted.
- Future measures include smaller collateral offloads and a price-guard mechanism to limit slippage risk.
- The incident on September 28 was disclosed on November 26, with losses covered by October 11; it marks Yearn’s fourth major issue since launching in 2020.
Yearn, a decentralized finance (DeFi) protocol known for its yield vaults, announced an incident affecting its yUSND vault on the Arbitrum blockchain. The problem stemmed from insufficient liquidity of USND, a stablecoin, causing high slippage during the conversion of liquidation rewards within the vault’s strategy.
The affected strategy was the rETH Stability Pool Strategy, which holds about 28% of the vault’s total assets. The issue led to losses just over $25,000 in USND, representing a 5.2% reduction in value for yUSND depositors. Yearn confirmed it has fully covered these losses to preserve users’ principal funds. The impact was limited to yield generated, not the initial deposits.
The announcement came from johnnyonline, a pseudonymous contributor to Yearn. The protocol disclosed the event on November 26, though it took place on September 28, with compensation completed on October 11. To reduce future risks, Yearn will execute collateral trades in smaller portions and add a price-guard system designed to halt trades if price swings exceed safe limits.
Yearn has experienced several incidents in its history. In February 2021, a flash loan exploit led to an $11 million loss in the DAI v1 vault, with the attacker profiting about $2.8 million. More recently, in April 2023, a vulnerability caused an $11.4 million loss due to a coding error in the yUSDT vault’s underlying assets. In December 2023, a faulty multisignature transaction resulted in a $1.4 million loss to the treasury through unintended token swaps involving the project’s yCRV holdings.
Launched in 2020 as iearn Finance, Yearn once managed a total value locked (TVL) high of $6.9 billion in late 2021. As of now, it holds approximately $343 million in TVL according to DeFiLlama data. DeFi remains a high-risk sector in the cryptocurrency market, but Yearn is considered a more established protocol compared to newer, riskier yield vaults that have experienced rapid collapses.
For further details on related challenges in DeFi, readers can refer to related articles such as this report on yield vault collapses and the ongoing risks within the ecosystem.
✅ Follow BITNEWSBOT on Telegram, Facebook, LinkedIn, X.com, and Google News for instant updates.
