compound protocol ceth market experiences bug

An upgrade that was intended to improve how the pricing data for Compound’s cETH token experienced an issue that led the developing team to freeze the market for this synthetic asset as it will take 7 days for the situation to be resolved.

According to a tweet published yesterday, the implementation of Proposal 117, which would supposedly update the price feed for cETH “contained an error” despite having been audited by three different parties.

In response, the developing team has created a new proposal numbered 119 to fix the issue. Compound stated that funds are not “immediately at risk” but acknowledged that this is a developing situation.

Users are still able to deposit funds into the protocol but cannot withdraw them at the time.

In the absence of a price feed, users are being encouraged to manually monitor their open positions on Compound as they could get instantly liquidated once the price feed is back up if the price of Ether (ETH) has dropped below the liquidation price during that period.

Users’ Funds Are Safe According to Compound’s Security Advisor

“These [Compound] users can add collateral and repay borrowed assets normally to cover for eventual price drops by monitoring their borrow positions accordingly”, commented Michael Lewellen, a member of the crypto auditing firm OpenZeppelin, in a post published on the Compound’s governance forum.

Lewellen, who is also a security advisor for Compound, added: “The primary issue right now is a temporary denial of service for the cETH market which will be resolved by the new governance proposal. No funds are at risk at this time. The rest of the cToken markets on Compound V2 and all of V3 remain functional”.

The market for cETH is reportedly worth $800 million, making it the second-largest for the protocol. cETH is a synthetic asset used within the Compound platform for yield farming. These tokens can be minted by depositing Ether tokens as collateral.

The native token of the Compound protocol, COMP, is dropping by nearly 3% on the news at $46.3 per coin. So far this year, the value of the token has declined by 77% as the crypto winter and certain incidents such as the collapse of the Terra ecosystem and the bankruptcy of the Celsius Network have undermined the public’s confidence in yield farming and crypto lending platforms.

What are Synthetic Assets?

A synthetic asset is a financial derivative whose value is determined by that of the underlying financial asset it tracks. These assets exist both in the traditional financial markets and in the crypto industry.

Many decentralized finance (DeFi) protocols use these assets to facilitate transactions within their platforms and reduce costs as they don’t have to rely on other blockchains.

Through cETH, users of Compound can deposit and earn interest on ETH and borrowers can also secure loans on the platform to operate in the market.

Compound Price Prediction 2022

According to Wallet Investor, the short-term outlook for the Compound token is bearish based on an assessment of its technical indicators. Based on the algorithm’s estimates for the next 14 days, the price is expected to decline to a range between $32.4 and $42.7 per coin resulting in a total downside risk of 30.2%.

Meanwhile, Gov.capital, another third-party forecasting service, is estimating that the price could, at some point within the next 14 days, decline to $34 per coin while the token will remain on a downtrend during that period to land at around $39 per coin.

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