Jet Community Members,
It has been a turbulent week amongst the crypto community. Amidst the extreme volatility, the Jet development team took proactive actions to safeguard user funds on the protocol. However, the insolvency of FTX has caused collateral damage to many protocols, including Jet.
On 11/12, the Protocol experienced an exploit stemming from Sollet wrapped BTC (soBTC), which was a bridged cross-chain asset managed and custodied by FTX. soBTC de-pegged its 1:1 value relation to BTC as markets questioned the backing of the pegged asset. Since no soBTC specific price oracle existed, Jet Protocol was using a BTC oracle to price and value soBTC. For a brief period of time, users were able to exploit the de-pegging by depositing soBTC, borrowing USDC and USDT, and continuing borrowing in this cycle. Two users were able to accomplish this before the Jet development team identified the issue and paused borrows.
The timeline of events can be found below (CST):
11/7 8:45 PM: FTT crashes below $22 to $4
11/10 4:00 AM: Jet Development team proactively adjusts FTT and soBTC collateral weight
0% collateral for all new positions
Unchanged collateral weight for existing positions as to not unfairly force liquidations
11/11 7:00 PM: soBTC loses peg
11/12 9:30 AM: Two existing users begin exploiting the protocol by depositing soBTC to existing soBTC positions. The users gradually increased deposits of soBTC and borrows of USDC amassing ~$215K in negative account equity
11/12 11:38 AM: Jet development team becomes aware of exploit
11/12 1:22 PM: Jet development team pauses borrowing from all pools and began investigating solutions
11/16 1:00 PM: Jet development team implemented a fix
11/16 1:30 PM: Jet development team assumed bad debt and repays negative equity bringing the protocol whole
11/16: 2:00 PM: Protocol restored to full functionality
Without swift action this exploit certainly could have been worse. Jet developers covered the shortfall on the protocol, and no users experienced loss of funds or liquidations stemming from the exploit. Protecting the health of the protocol, and more importantly protecting Jet users, will always be the development team’s number one priority.
Events like these underscore the need for a robust decentralized financial system. It is more clear than ever that hacks and mismanagement are best prevented with self-custody, transparency, and strong governance within DeFi. In the short term, there will continue to be pain within the broader crypto ecosystem. However, no decline in price changes the fact that the core technology underpinning Solana presents a significant opportunity for scalable decentralized finance.
Jet remains steadfastly committed in its mission to bring fully transparent, fixed-rate real yield on-chain. The Jet Protocol team will continue to build a better, more transparent and accessible future, for all.
If you have any questions or concerns please visit the Jet Forum https://forum.jetprotocol.io/ and drop a note.