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Radiant Capital initiates debt repayment after $4.5M flash loan exploit

In this post:

  • Radiant Capital’s $4.5M debt recovery is underway, boosting investor confidence.
  • Strong community consensus for using DAO funds to repay bad debt.
  • Flash loan exploit underscores persistent risks in DeFi security

Radiant Capital, a cross-chain lending protocol, has embarked on a path to recover from a recent flash loan exploit that resulted in a substantial loss of $4.5 million.

In a bid to rectify the situation, Radiant Capital has taken proactive steps to clear its bad debt, expecting to achieve full debt repayment within the next 90 days.

Radiant Capital’s successful initial payment

Radiant Capital has successfully executed an initial payment amounting to 1,190 Ether (approximately $2.6 million), leaving approximately 720 ETH (equivalent to $1.6 million) in bad debt yet to be resolved. 

The repayment process is being carried out by the RFP-27 proposal, which garnered substantial support from the Radiant community and passed.

The Radiant community demonstrated its commitment to addressing the debt issue, with an overwhelming 73% of users voting in favor of repaying the bad debt using existing funds from the Radiant DAO Treasury and operating expenditures. 

At the time of the proposal’s passing, the Radiant DAO Treasury held a balance of $5.2 million, while the protocol’s monthly revenue amounted to approximately $500,000.

Ensuring protocol safety

Radiant Capital’s developers emphasized the critical importance of recapitalizing the protocol and fully reimbursing the bad debt. Their primary objective is to safeguard the protocol’s security and ensure unrestricted access to deposits for all users.

The unfortunate incident unfolded when Radiant’s USD Coin lending pool, located on the Arbitrum network, fell victim to a $4.5 million exploit. The attacker identified a rounding issue in the Radiant codebase, which subsequently led to a cumulative precision error. 

This vulnerability enabled the attacker to exploit the system through repeated deposit and withdrawal operations.

Analyzing the root cause

Blockchain analytics firm Beosin provided insight into the root cause of the exploit, noting that it essentially capitalizes on a time window when a new market is activated within a lending market, a practice similar to popular platforms like Compound and Aave. 

The exploit resulted in Radiant losing an alarming 1.3% of its total value locked at the time of the incident.

Radiant Capital’s response to this setback underscores its commitment to the recovery process and its dedication to making its lending protocol more resilient to such exploits in the future. The proactive approach of addressing the debt issue and involving the community in the decision-making process reflects Radiant’s determination to ensure the protocol’s long-term sustainability.

Looking ahead

In the coming months, Radiant Capital plans to continue making repayments in line with the RFP-27 proposal, to clear the remaining bad debt within approximately 90 days. 

Additionally, Radiant remains open to the possibility of leveraging DAO reserve funds if liquidity becomes available sooner than anticipated.

The cryptocurrency and blockchain community will undoubtedly keep a close watch on Radiant Capital’s progress as it endeavors to recover from this significant setback and strengthen its protocol against potential vulnerabilities.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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