All referenced data can be accessed directly on the Gearbox dashboard by RiskDAO.
Summary
Alpha Homora (AH) & Iron Bank (IB) are at a stand-off over $32m bad debt Iron Bank incurred as part of an exploit in Feb 2021, caused by a glitch on the part of Alpha Homora.
Alpha Homora was one of the first protocols to enter DAO-2-DAO protocol relationship with Iron Bank to receive undercollateralised loans. As a consequence, IB held no collateral to liquidate when the hack happened but relied on financial guarantees by AH.
To resolve the situation, both parties agreed a scheme to make Iron Bank whole: 20% of AH‘s revenue and 50m in $Alpha token as collateral. The revenue split has generated $5k in monthly revenues and the $Alpha token price has declined significantly in price since the agreement was struck.
It appears the situation accelerated as the $Alpha token fell significantly and in return impaired the collateral value. IB asked for the collateral to be topped off and didn’t receive a response within a 3 day deadline.
As of 1st March, Iron Bank has frozen all AH user deposits into IB to enforce a bad debt repayment. The Iron Bank team updated a contract configuration to freeze the deposits. Iron Bank is basically holding AH‘s depositors accountable to repay AH‘s DAO debts. This sets a precedent on how financial responsibility is shared between a protocol and its users towards external partners. Besides, it challenges the notion of decentralisation in DeFi.
AH is actively trying to mitigate the impact on its users through legal means, white hat hackers and calls to Circle/Tether. AH has issued a series of Open Letters to appeal to IB and the DeFi community.
IB had originally set a deadline of 5 March, 23:00 GMT to receive the bad debt repayment and a repayment of all AH v2 debts. Subsequent proposals were dismissed as unsatisfactory by IB but accounts on Avalanche, Fantom & Optimism were unfrozen. As of 9 March, AH is seeking feedback from the community on a scheme that would transfer the bad debt from AH to their users. No agreement has been reached. TBD
Silvergate Bank
Silvergate Bank, one of the largest banking partners to crypto exchanges and market makers, has experienced a material deterioration to its capital base in the wake of the crypto downturn in 2022. The Bank has announced a voluntary liquidation and will wind down.
Major players like Coinbase and Paxos have publicly declared immaterial exposure to Silvergate.
Stablecoin monitoring
GUSD liquidity increased from $32.5m to $41.5m. sUSD liquidity increased from $23.9m to $26.7m. LUSD saw further increases from $26.9m to $29.7m. sUSD backing declined from 470% to 447%. LUSD backing amounts to 246% (down from 264%).
DEX liquidity for all other stablecoins remained largely unchanged.
There are no material oracle deviations between DEX and CEX prices.
Watchlist
stkcvxcrvPlain3andSUSD has an outsized share within the collateral pool as it accounts for 41% (unchanged) of the total. This in itself does not pose a specific red flag but deserves extra attention to avoid concentration risk from building up.
Pools summary (weekly comparison)
DAI
Total pool size increased marginally from $19.4m to $19.8m. stkcvxcrvPlain3andSUSD remains the #1 asset at $13.6m (+$1m), followed by stkcvxgusd3CRV at $3.9m (unchanged) and yvDAI at $1.1m (-$0.6m).
Total debt increased from $16.4m to $16.8m.
The pool remains predominantly collateralized by stablecoins.
USDC
Total pool collateral decreased from $34.8m to $34.5m, with the largest collateral assets being stkcvxcrvPlain3andSUSD (-$1.2m to $21.9m) & stkcvxgusd3CRV (unchanged, $6.8m), followed by stkcvxLUSD3CRV-f at $2.3m .
This pool also remains large backed by stablecoin assets.
Total debt decreased by $0.2m to $28.8m.
WETH
The pool experienced a decrease from $32.8m to $31.8m. The largest collateral assets are stETH (-$1.1m to $17m), stkcvxsteCRV (+$0.3m to $11m) and yvWETH (-$0.1m to $2.4m).
The pool remains collateralized by mostly ETH or staked ETH assets.
Total debt decreased from $26.7m to $25.8m.
FRAX
This is a new pool that went online recently. It has total collateral of $1.9m, mostly in the form of stkcvxLUSD3CRV-f ($0.82m), stkcvxFRAX3CRV-f ($0.57m) and stkcvxgusd3CRV ($0.3m).
Total debt stands at $1.6m
WBTC
All credit accounts have been closed. The pool has had relatively small scale since inception with total assets of $0.14m over the last weeks.
wstETH
Demand for borrowing stETH continues to be subdued with no active credit accounts. This is a continuation from the previous week.