Prisma Finance Aims for Recovery, $540K at Risk

Prisma Finance’s Response to Security Breach

Prisma Finance is actively addressing a recent security breach that resulted in an $11.6 million loss, focusing on implementing a recovery strategy.

Immediate Response and Recovery Strategy

Following the hack, core contributor “Frank” shared details of the decentralized finance (DeFi) protocol’s immediate response and upcoming actions. Frank highlighted that $540,000 of the exploited funds are still at risk.

Prisma Finance’s Proposal

As part of the response strategy, Prisma Finance plans to reduce the protocol owned liquidity (POL) significantly. This includes lowering the weekly POL amount from $40,000 to $0. Additionally, there will be a reduction in the weekly distribution to vePRISMA holders, halving the amount from $160,000 to $80,000.

These proposed changes are considered crucial at the moment and will be reassessed one week after implementation based on new information.

Security Incident Details

The exploit at Prisma Finance was carried out through a vulnerability in the migration zap contract, resulting in the loss of $11.6 million. The contract, originally designed for trove manager transitions, was manipulated to extract assets, including wrapped staked Ethereum (wstETH), which were quickly converted to Ethereum (ETH) to hinder tracking and recovery efforts.

It is important to note that the core functionality of Prisma Finance remains intact, with the issue isolated to the migration zap contract, ensuring the overall protocol’s security.

Emergency Measures

Prisma Finance took immediate action by implementing an emergency pause on all trove managers, suspending borrowing activities and preventing new liquidity injections into the protocol to stabilize the situation.