LOFI presents a fully-built Blend v3 candidate addressing failures in the Comet LP pool. In response to a critical exploit that drained $51M in BLEND tokens, the proposal introduces tiered backstops, XLM as a designated swap token to reduce USDC dependency, and comprehensive clawback support for real-world assets. The candidate aims to keep Blend's immutable core and permissionless design while extending features needed for institutional adoption.
A critical bug in the Comet liquidity pool allowed attackers to withdraw funds without removing LP shares, and a same-token swap vulnerability caused massive liquidation cascades. When USDC was extracted, BLEND price collapsed, and arbitrage bots drained an additional 51 million tokens from the pool. In response, LOFI paused v3 development work and spent days analyzing and fixing the Comet pool, then built a working v3 candidate from those learnings. The proposal introduces three major changes: tiered backstops (junior and senior tranches with independent risk/reward profiles), support for XLM as the designated emitter swap token (removing USDC as a single point of failure), and clawback support for compliant asset issuers. Additional fixes address edge cases in the pool math, including potential overflow scenarios, precision issues in power approximations, and terminal states when pools reach zero. LOFI's v3 candidate maintains Blend's original design principles around permissionless operation and immutable contracts while adding the guardrails institutional users require.
