Decentralized finance (DeFi) protocol Balancer has warned LPs on the protocol to withdraw their liquidity immediately due to an ongoing issue.
The protocol did not specify what the issue was but added that the emergency DAO could not mitigate it.
LPs Advised To Pull Liquidity
The team at decentralized finance protocol Balancer has advised some LPs to pull their liquidity immediately. The warning was issued after ongoing issues related to some of the service’s pools were discovered by the protocol. Some liquidity pools on the protocol have seen their fees set to zero by Balancer’s emergency multisig. However, despite this measure, the team has indicated that this approach could mitigate not all effects of the issue.
“IMPORTANT: Because of a related issue, LPs of the following pools should remove their liquidity ASAP as the issue cannot be mitigated by the emergency DAO.”
Balancer announced the issue on Twitter on the 6th of January at 2:03 am UTC, adding that the team had set protocol fees to zero to attempt to mitigate the problem. The team further added that it would disclose more details in the near future.
“Protocol fees of some Balancer pools have been set to 0 to avoid an issue that is now mitigated and will be publicly disclosed in the near future. This has been done by the emergency multisig, a 4/7 comprised of BLabs engineers and Balancer Maxis. These pools continue to function normally, so no action is needed by the LPs of those pools. They will continue to accrue swap fees, but the protocol will not take its cut from them.”
Impacted Pools
Balancer has asked LPs to pull liquidity from specific pools because the emergency DAO has been unable to mitigate the ongoing issue. As a result, LPs on Ethereum (ETH), Polygon (MATIC), Optimism (OP), and Fantom (FTM) versions of Balancer (BAL) have been asked to remove liquidity.
On Ethereum, the issue has impacted the DOLA/bb-a-USD pool, which has a current Total Value Locked (TVL) of $3.6 million in equivalent. On Polygon, LPs were advised to remove liquidity from the bb-am-USD/miMATIC pool. On Optimism, the problem has impacted the MAI Life and Smells Like Spartan Spirit Pools. Furthermore, users of the Fantom-based “friendly fork” of Balancer were advised to remove $1.9 million from the Tenacious Dollar Liquidity Pool. The pools on Arbitrum, according to Fernando Martinelli, remain unaffected by the issue.
Balancer also stated that if a pool’s transaction fee has been set to zero by the emergency multisig, then LPs do not need to take any further action. The pools in question will continue to accumulate fees. However, Balancer would not be taking its cut.
Community On Tenterhooks
Balancer is currently the 6th largest decentralized exchange in terms of trading volume and handles around $52 million worth of crypto trades daily, according to data from DeFiLlama. The Balancer community’s initial reaction has seen some members fearing the worst, citing the vagueness of the protocol’s statement about the issue and what it could potentially be. The problem at Balancer comes after the Radium DEX was subject to a fee exploit, where a malicious entity utilized an admin key to change pool parameters. This allowed them to trick the pool smart contract into behaving as if the pool contained only accumulated admin fees.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.