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Monad Co-Founder: Rate Limits on Collateral Supply Could Have Prevented $200 Million Loss in Today's rsETH Incident

On April 19, Monad co-founder Keone Hon stated, "I feel that 'liquidity pool lending protocols' should set rate limits on the supply of assets deposited as collateral. For example, if the current supply is 100 million and the supply cap is 300 million, then in the next 10 minutes, the maximum allowed increase should be to 110 million, rather than allowing a single deposit of the entire 200 million. In reality, no one needs to make such a large deposit all at once. This is crucial because when certain 'exotic assets' are attacked, the impact depends on the 'exit channel size' of that asset. Especially in many cases where attacks fall under 'infinite minting vulnerabilities', the scale of the exit that can be made essentially determines the upper limit of the attack loss. Lending protocols often serve as the largest exit channel. If a 'smart cap' were introduced, where the initial cap is slightly above the current supply and gradually adjusted to the true cap over several hours, it would have a significant effect. If such a mechanism were in place, today’s rsETH depositors could have avoided approximately $200 million in losses. This also raises the point that asset issuers themselves should support such mechanisms. If you are issuing redeemable tokens with redemption delays, you are not worried about hackers redeeming directly from you, but you need to compress the external exit path size as much as possible without affecting normal user usage. Therefore, a high supply cap should be viewed as a risk rather than a symbol of strength. For instance, the Hyperbridge DOT attack did not result in a $100 million loss because there were few exit paths; the Resolv attack resulted in a loss of $24 million instead of $200 million because the exit path size limited the loss cap. This is an obvious truth, but there are still immediately actionable measures: audit the supply caps of all assets and lower the caps when unnecessary.

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