1/ Every architecture involves tradeoffs.

Good design allows you to design a system where, for every unit of risk you take, you earn the most reward, and for every unit of reward you take, you incur the least risk.

From a liquidity risk PoV, Morpho's model is suboptimal. 2/ To start, every lending protocol carries risk. We’ve explored this previously

Some are obvious:

- insolvency
- oracle failures
- smart contract exploits

Others are more subtle, such as liquidity risk.

That’s the one we’ll focus on here.

https://x.com/chaoslabs/status/1984326134079562063

1/ TL;DR

Hours after a multichain @Balancer exploit triggered widespread uncertainty across DeFi, @berachain executed an emergency hard fork, and @SonicLabs froze the attacker’s wallet.

Shortly after, Stream Finance’s xUSD began to depeg materially below its target range. 2/ Long-standing questions resurfaced around leverage, oracle construction, and PoR transparency.

It's a textbook case of the reflexive stress events we outlined last Friday in our DeFi’s Black Box/Vaults article.

$500K gone in 180 seconds.

Chainlink just proved oracles are one of the weakest links in DeFi.

Here’s what happened: 1/ Earlier today, Chainlink’s deUSD price feed spiked to $1.028—just enough to tip the Avalanche Euler market over the edge.

Within minutes, $500K+ of leveraged positions were wiped out.

1/ Bybit’s 1.4b Hack, Ethena, Aave, and Oracles

Exploring @Bybit_Official exploit impact on @aave, @ethena_labs, and USDe pricing.

How DeFi responded to the largest hack ever, contagion risk, pricing, and how Proof of Reserves could have prevented $20M+ in liquidations 🧵👇 2/ In the aftermath of the attack, our team at @chaos_labs, alongside @bgdlabs, @AaveChan, and @LlamaRisk opened a war room to assess potential @aave exposure and systemic risk.

1/ With the U.S. Presidential Election less than a week away, prediction markets are taking center stage.

At @chaos_labs, our mission is to build trust and transparency in the markets of the future through high-quality data and risk management tools. 2/ Our focus isn’t on politics but on the tools and metrics that power prediction markets, which we see as an important distinction.

With products like the Edge Oracle, we help these markets fulfill their promise of open, decentralized data.

1/ $230K @MorphoLabs PAXG/USDC Market Oracle Exploit Breakdown

The Morpho PAXG/USDC market (tokenized gold via @Paxos) was exploited, leading to a $230K loss.

The root cause? A misconfigured oracle pricing gold at $2.6 trillion USD. 2/ Exploit Breakdown: Pt. 1 → Oracle Misconfiguration pricing gold at $2.6 Trillion

Morpho’s markets allow users to create markets. Unfortunately, in this case, the deployer may not have fully understood Morpho's decimal system.

1/15 How many web3 users are **real**?

Spoiler: Not nearly as many as we'd like to believe.

**note**: The analysis and graphics presented in this thread are on protocols that are **not** @chaos_labs partners 2/15 With the rise of onchain agents and Sybils increasing, we're facing a crucial question:

What constitutes a real Web3 user? The answer is more nuanced than ever.

@LayerZero_Labs Sybil Analysis: @chaos_labs Final List

1/ Our original airdrop eligibility scan flagged over 800K LayerZero user wallets as Sybil. We've worked tirelessly with the LZ and @nansen_ai to narrow this down and ensure minimal false positives. 2/ The Chaos Labs final list now features ~440K addresses and can be found here.



Let's dive in 👇

https://x.com/PrimordialAA/status/1802260854970171748

1/ LayerZero Sybil Detector

The @LayerZero_Labs Foundation selected @chaos_labs and @nansen_ai to lead protocol usage analysis and Sybil detection.

Below, we provide our analysis principles, methodology, and heuristics, showing our commitment to transparency, integrity 🧵 2/ Principles of Analysis

- Real users should not be hurt; we aim to maximize precision over recall
- We aim to focus on industrial farmers and primarily rely on source of funding analysis heuristics

1/ @synthetix_io Market Manipulation

We've received outreach about today's market manipulation. This incident is isolated to the $TRB market, resulting in a ~2m loss to $SNX stakers. Let’s give some background before diving into the attack. 2/ @synthetix_io powers various perp markets. Asset listing and monitoring are critical - factors like liquidity, volatility, and holder distribution must be monitored to gauge manipulation feasibility. @chaos_labs automates observability w the Risk Portal.

1/ @chaos_labs is proud to launch the @Uniswap V3 TWAP Oracle Risk Portal, in collaboration with @UniswapFND.

The Portal highlights real-time cost of of TWAP manipulation across V3 pools. 2/ But first, why is Oracle Manipulation an attractive exploit vector for attackers?

TWAP oracle manipulation leads to severe consequences for protocols that consume those price feeds, enabling attackers to distort prices, leading to economic exploits. Examples below 👇

1/ Excited to share that @chaos_labs has partnered with @GMX_IO to launch the GMX GLP Risk Hub! 🥳💥

V0 is live for @arbitrum @avax and focuses on margin at risk, real-time metrics, alerting, and VaR simulations.

community.chaoslabs.xyz/gmx-arbitrum/c…

Let's dive into the platform below! 👇 2/ Overview Page

The overview page presents top-level protocol metrics such as total GLP pool size, 24-hour fees and volume, and total open interest. The page also displays time series data on GLP pool value, composition, short and long open interest, and daily fees

1/ We are thrilled to announce we have secured $20M in seed funding led by @galaxyhq and @PayPal to automate on-chain risk optimization! 🔐 2/ @coinbase, @Uniswap, @lightspeedvp, @BessemerVP, @HashKey_Capital and top angels @balajis & @naval were also part of this amazing round. 🤝