Pac Finance, a lending protocol on the Blast network, faced a major issue when its liquidation threshold was changed without warning, leading to a loss of $26 million for users.

This incident sheds light on the ongoing struggles that DeFi protocols like Pac Finance face on the Ethereum layer-2 network. Just last month, Munchables, a web3 game on Blast, suffered a significant attack resulting in a loss of over $62 million, which was fortunately returned by the hacker voluntarily.

On April 11, founder Will Sheehan noticed a large number of ezETH liquidations on Pac Finance. This was confirmed by developer Kydo, who stated that an EOA wallet controlled by Pac Finance changed the liquidation threshold suddenly without a timelock, causing $26 million in liquidations within 6 seconds of the update.

Pac Finance allows users to earn interest by depositing their crypto holdings, with borrowers subject to loan-to-value ratio (LTV) rules. However, a developer's actions resulted in the LTV changing to 60%, causing many borrowers to be liquidated, with one user losing $23.9 million.

In response, Pac Finance is working with affected users to address the issue and prevent future incidents. They are developing a system to notify users of any changes before they occur to avoid similar situations in the future. Aave founder Stani Kulechov commented on the situation, attributing it to a lack of understanding of the codebase, as Pac Finance is based on Aave's code.

The unexpected liquidation of users on Pac Finance for $26 million highlights the importance of transparency and communication in DeFi protocols to prevent such losses in the future.