How investors can withdraw in a timely manner before the DeFi protocol is suspended

In the event of an emergency, DeFi protocol parties can suspend the protocol and freeze the current funds in a timely manner, which is a means of self-protection, but it puts the security of liquidity providers (LPs) in great uncertainty and risk. **

Taking the security vulnerability of the Euler platform in March 2023 as an example, this incident forced multiple projects such as Balancer, Angle Protocol, and Yield Protocol to freeze their capital pools, affecting assets worth nearly $10 billion. In this AAVE V2 incident, the value of directly affected assets is $2.5 billion.

However, in the face of the uncertainty of how to deal with the suspension of the protocol and the freezing of the pool, perhaps liquidity providers (LPs) have another option - to use the Phalcon Block to withdraw funds one step ahead of the time before the protocol initiates a suspension order! **

In response to this need, BlockSec’s automated monitoring and attack blocking system “Phalcon Block” and DeFi investment management solution “Cobo Argus” provide liquidity providers (LPs) with a complete set of “automatic withdrawal strategies”, which can detect liquidity pool freezing information in time and trigger the bot to withdraw funds before the suspension order of the DeFi protocol takes effect.

AAVE Pause Event Recap

On November 5, Aave, the head protocol, received a report of a critical vulnerability from White Hat, and urgently suspended the protocol and froze user assets. According to DefiLlama data, AAVE is the leading DeFi protocol with a TVL of more than $5 billion. Among them, the TVL of AAVE V2 affected this time accounts for nearly half, at $2.5 billion. This means that the agreement is suspended and the digital assets involving $2.5 billion are frozen.

According to relevant media reports, Aave’s undisclosed vulnerability may be reproduced on 30+ fork projects**!

AAVE Official Statement

Understanding Transactions with Phalcon Explorer

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For a leading DeFi protocol like AAVE, we tend to believe that the funds deposited by users will be safe and sound after the vulnerability is fixed, and the protocol will continue to function.

However, there will always be situations in the Web3 world that break through the imagination, and in the past two years, there have also been extreme situations where LP funds cannot be raised for several months after the liquidity pool of some protocols is frozen, such as PolyNetwork, CoinWind, etc. Such a suspension of the protocol not only greatly affects the LP’s capital utilization efficiency, but also forces the LP’s capital security to face great risks.

Although different protocols have different credit ratings, different reasons behind the suspension of the protocol, and different results after the suspension, it should be the right of every liquidity provider (LP) to have the right to know in a timely manner and the option to withdraw funds.

What should LPs do

Phalcon Block, a monitoring and blocking platform launched by BlockSec, in collaboration with Cobo’s Cobo Argus platform, will completely solve this problem faced by liquidity providers.

Operation Path

Step 1: Monitor

Liquidity providers (LPs) register as users of the Phalcon Block platform, monitor protocols (such as AAVE, etc.) for depositing large amounts of funds, set alerts and trigger conditions (Phalcon Block provides one-click default configuration).

Phalcon Block provides a number of monitoring capabilities such as key variables, sensitive events, number of tokens, and token price. Taking the AAVE incident as an example, the project team set the “Key Variable” of the protocol to “Pause” and output a “Sensitive Event” with the value of “Paused”.

Through the advance deployment of Phalcon Block, this intelligence can be captured in the Mempool stage before the transaction is on-chain, and the preset response mechanism can be triggered immediately, racing against time to withdraw funds in time.

Step 2: Trigger

Create a “Retreat Robot” on the Cobo Argus platform, and set the trigger condition to the Webhoo****k specified by the Phalcon Block, then you can trigger the “Retreat Robot” to work according to the intelligence instructions of the Phalcon Block.

Step 3: Withdraw

According to the real needs of LPs, deploy targeted “withdrawal contracts”, including single withdrawals, batch withdrawals, and withdrawal situations using trading strategies (Phalcon Block can provide technical services).

In short, when Phalcon Block detects a special transaction (behavior) of the Pause type, it immediately triggers an alarm to the Cobo Argus system, and automatically withdraws the funds and deposits them into the LP’s secure multisig wallet according to the previously set withdrawal logic.

Empower liquidity providers (LPs) to withdraw as many funds as possible in a block time! **

Full-link fund security guarantee

It should be emphasized that as a security product, Phalcon Block has always regarded the security of user assets as the top priority, and we respect the concept of decentralized governance and will never exceed it.

Therefore, we recommend that liquidity providers (LPs) use the multisig scheme to manage assets, and Phalcon Block and Cobo Argus provide the on-chain decentralization function to complete the withdrawal action in a timely and safe manner under the fully controllable authorization of the liquidity provider (LP).

For example, in this case, Phalcon Block was granted the Withdraw permission to ensure that the funds were withdrawn for the liquidity provider (LP) as soon as the protocol was suspended. However, at the same time, under Argus’s decentralization setting, Phalcon Block does not have any other operation permissions, so as to ensure that the withdrawn funds are still safely held in the original multisig wallet of the liquidity provider (LP) at the code level.

Guarding the safety of assets, more than that

This solution between Phalcon Block and Cobo Argus is not limited to emergency divestments in the event of a suspension of the agreement, but can also cover any risk scenario. **For example, the protocol helps liquidity providers (LPs) complete the secure transfer of assets at the moment of being hacked. **

We believe that working with excellent partners to create extremely reliable security products can truly protect investors’ funds from security threats and make the Web3 ecosystem full of opportunities, security and prosperity.