Yield Protocol has announced they have fully recovered from the Euler flash loan attack on the 13th of March.
A crypto flash loan attack is a type of cyber security breach in which the attackers exploit a smart contract within a DeFi protocol in order to steal funds. Yield Protocol has recently announced that they have successfully recovered from the Euler flash loan attack.
On March 13th, Euler Finance was hacked, which made the protocol lose huge amounts of money to the attack. Although the attack happened at Euler Finance, it also affected Yield Protocol because they kept some of their money with Euler Finance. Yield’s liquidity provider system was deposited with Euler to increase yields, and the hack negatively impacted the Protocol.
Yield’s liquidity provider system is built around YieldSpace (an automated market maker). YieldSpace is similar to Uniswap v2, although there are differences between the two. The former trade tokens in interest rates rather than prices. To ensure that its liquidity system is enhanced, it led to the integration of Euler Finance with YieldSpace. So Euler Finance was basically a smart contract that helped Yield Protocol to manage the deposit of liquidity funds.
Hence, when Euler was hacked, some of the funds' Yield Protocol deposited in the smart contract became frozen. This happened because of the immobilization of the eTokens it held.
The developers of the Yield Protocol decided to take more preventive measures by freezing every activity in their protocol. This way, they would prevent the hackers from taking any other action affecting the protocol. While speaking about their decision, Yield Protocol said, "We paused the entire Yield Protocol to prevent further damage. While we waited for the hack’s resolution, work continued on unaffected Yield Protocol features, but several potential solutions hinged on the hack’s outcome."
The Long Path to Recovery
Through a long and slow process, Yield Protocol finally announced they had made some recovery on May 18th. According to them in the announcement, they said their users could borrow and lend Yield Protocol tokens for the June and September series.
"The Yield Protocol is back in full swing after recovering from the Euler hack!
Now, users can once again borrow and lend at fixed rates for the June and September series. Plus, liquidity providers can pool their assets for a variable return. 💰💪," Yield Protocol said on Twitter.
But that wasn't the only process needed to make a full recovery. Yield Protocol still needed to restore assets to users to make a complete recovery. According to the Protocol," The final piece of the restoration puzzle is to return the assets to the affected users. This will be accomplished by having users swap impacted liquidity provider tokens for new liquidity provider tokens."
The Yield Protocol is back in full swing after recovering from the Euler hack!— Yield Protocol (@yield) May 18, 2023
Now, users can once again borrow and lend at fixed rates for the June and September series. Plus, liquidity providers can pool their assets for a variable return. 💰💪
On the 27th of June, Yield Protocol made another announcement, saying that they had finally made the complete restoration. With this new development, it means that their users can now withdraw their tokens." Protocol restoration on Mainnet is complete! We have now fully recovered the protocol from the Euler hack and the liquidity provider bug.
LPs are once again earning fees. To withdraw, LPs need to first upgrade their strategy tokens," Yield Protocol said on Twitter.