Security Incident: Rebalancing mETH & WETH User Positions Walkthrough
This article is only relevant for suppliers on the mETH and WETH markets who were impacted due to the recent security incident.
As communicated on the Minterest Remediation Plan post, resetting the Minterest protocol to a healthy state requires a decrement of the mETH and WETH token pools. This adjustment has reduced user supplies within the respective pools.
The rebalancing of portfolio positions from the reduction in mETH and WETH supply balances took place on August 5th, 2024.
In order to maintain complete transparency of the process used to adjust portfolio positions, a page is now available on the Minterest app that shows changes between user portfolio positions on August 5th, 2024 both immediately before rebalancing and immediately after rebalancing steps.
In some cases, the rebalancing process may have reduced the Health Factor of the user’s portfolio position below 1, requiring solvency recovery to rebalance the position to a healthy state. In such a situation a third state is introduced on the page to show the state after solvency recovery takes place. It is important to note that these operations are only used to rebalance the internal token pools of Minterest, and there is no additional loss of funds for protocol users during this phase since fees are fully reimbursed.
1. Before Rebalancing on August 5th, 2024 – Total balance and balance by market before rebalancing the portfolio.
2. After Rebalancing on August 5th, 2024 – Total balance and balance by market with supply reduction applied to the mETH and WETH markets. Supply positions on all the other markets as well as all borrowed positions (mETH and WETH included), remain the same.
3. After Solvency Recovery (for select users)on August 5th, 2024 – Total balance and balance by market after user solvency is recovered by necessary partial liquidations. Only applicable to users who became insolvent due to the supply reduction.
Access the Rebalanced Portfolio Page
For impacted users, access the Rebalanced Portfolio page by logging in with your wallet on the Minterest application on Mantle Network and click on the View Balance Change button in “Your Rebalanced Portfolio” section.
Below is a detailed explanation of how user positions changes are displayed immediately before and after the rebalancing update on August 5th, 2024.
Your Supply and Borrow Balance Overview
Stage 1: Before Rebalancing on August 5th, 2024
1. Your Total Value Locked (USD) shows the net value of your assets in USD before rebalancing. TVL is equal to Your Total Supply (USD) minus Your Total Borrow (USD).
2. Your Total Supply (USD) displays the total USD value of assets you have supplied to the Minterest platform.
3. Your Total Borrow (USD) shows the total USD value of assets you have borrowed from the platform.
4. Your Total Collateral (USD) reflects the maximum USD value of your assets that can be used as collateral.
5. Your Health Factor indicates the health of your position; with a value above 1.0, your portfolio is considered healthy.
Stage 2: After Rebalancing on August 5th, 2024
1. Your Total Value Locked (USD) shows the updated net value of assets in USD after a reduction is applied to the supply of mETH and WETH.
2. Your Total Supply (USD) displays the updated total USD value of assets supplied to the platform after the reduction.
3. Your Total Borrow (USD) shows the updated total USD value of assets borrowed from the platform.
4. Your Total Collateral (USD) reflects the maximum USD value of your assets that can be used as collateral after the change.
5. Your Health Factor indicates the updated health of the position after the reduction in supplied mETH and WETH assets. If this number is equal to 1 or higher, the portfolio is healthy and no further steps are required. If it is lower than 1, the position is to be further rebalanced in stage 3.
Stage 3: After Solvency Recovery (For Select Users) on August 5th, 2024
This stage is only relevant for the users whose Health Factor drops below 1 during Stage 2, requiring further portfolio rebalancing. Note, this process results in no additional loss of funds as users will be refunded any liquidation fees.
1. Your Total Value Locked (USD) shows the updated net value of your assets in USD after the liquidation event. Minterest will be returning liquidation fees to your wallet, so your number of tokens will be equivalent to Stage 2. Insignificant exchange rate differences may apply.
2. Your Total Supply (USD) shows the reduced total USD value of assets you have left as supplied to the platform after liquidation took place.
3. Your Total Borrow (USD) displays the final total USD value of assets that you have borrowed from the platform after liquidation.
4. Your Total Collateral (USD) reflects the maximum USD value of your assets used as collateral after liquidation.
5. Your Health Factor indicates the final health of your position after the solvency recovery event. It now exceeds 1.
6. Liquidation Fee to be returned (USD) shows the liquidation fee that Minterest will return to your wallet after the solvency recovery.
Affected Markets (WETH and mETH)
Stage 1: Before Rebalancing on August 5th, 2024
1. Your Supply (tokens) shows the number of tokens you had supplied in the WETH or mETH markets before rebalancing.
2. Your Borrow (tokens) shows the number of tokens you had borrowed from the WETH or mETH markets before rebalancing.
3. Your Supply (USD) displays the value in USD of the tokens you supplied to the WETH or mETH markets before rebalancing.
4. Your Borrow (USD) displays the value in USD of the tokens you borrowed from the WETH or mETH markets before rebalancing.
Stage 2: After Rebalancing on August 5th, 2024
1. Your Supply (tokens) reflects the reduced number of tokens after rebalancing.
2. Your Borrow (tokens) the borrowed amount remains the same.
3. Your Supply (USD) reflects the value in USD after the supply reduction.
4. Your Borrow (USD) the borrowed amount remains the same in USD terms.
Stage 3: After Solvency Recovery (For Select Users) on August 5th, 2024
1. Your Supply (tokens) shows the number of tokens remaining after rebalancing of insolvent positions through liquidation.
2. Your Borrow (tokens) shows the number of tokens remaining borrowed after liquidation, if applicable.
3. Your Supply (USD) shows the final USD value after rebalancing of insolvent positions through liquidation.
4.Your Borrow (USD) shows the final USD value of the borrowed tokens after necessary liquidation, if applicable.
Unaffected Markets (USDT, USDC, and USDY) on August 5th, 2024
Stage 1: Before Rebalancing
1. Your Supply (tokens) shows the number of tokens you supplied in the USDT, USDC, or USDY markets before rebalancing.
2. Your Borrow (tokens) shows the number of tokens you borrowed from the USDT, USDC, or USDY markets before rebalancing.
3. Your Supply (USD) displays the value in USD of the tokens you supplied to the USDT, USDC, or USDY markets before rebalancing.
4. Your Borrow (USD) displays the value in USD of the tokens you borrowed from the USDT, USDC, or USDY markets before rebalancing.
Stage 2: After Rebalancing on August 5th, 2024
1. Your Supply (tokens) – the number of tokens supplied remains the same as there was no reduction in these markets.
2. Your Borrow (tokens) – the borrowed amount remains the same.
3. Your Supply (USD) – the value in USD remains unchanged as these markets were not impacted by the reduction.
4. Your Borrow (USD) – the borrowed amount remains the same in USD terms.
Stage 3: After Solvency Recovery (For Select Users) on August 5th, 2024
1. Your Supply (tokens) – the remaining number of supplied tokens after liquidation.
2. Your Borrow (tokens) – the number of tokens borrowed remains unchanged unless there were specific individual liquidations unrelated to the incident.
3. Your Supply (USD) – the final value in USD after liquidation.
4. Your Borrow (USD) – the final value in USD remains unchanged unless there were specific individual liquidations unrelated to the incident.
Example 1. User Alice did not require solvency recovery after portfolio rebalancing.
Alice’s Total Supply amount was the same as Bob’s, but her Total Borrow position was twice less.
Stage 1: Before Rebalancing on August 5th, 2024
Immediately before the rebalancing action on August 5th, 2024, Alice’s position within the Minterest protocol was as follows:
- Total Supply: $185,999.74
- Total Borrow: $65,798.51
- Total Collateral: $148,577.11
Alice supplied assets in the markets for WETH, WNMT, and METH, and borrowed assets in the WETH and METH markets. The Health Factor of 2.26 indicated that her collateral was more than enough to cover her borrowings.
Stage 2: After Rebalancing on August 5th, 2024
Following rebalancing to the supply of mETH and WETH assets, Alice’s portfolio experienced some changes:
- Total Supply: $160,396.31 (reduced supply on mETH and WETH markets)
- Total Borrow: $65,798.51 (remained the same)
- Total Collateral: $128,094.37 (reduced proportionally to Total Supply)
As a result, the Health Factor decreased to 1.95, but remained well above 1, indicating that Alice’s portfolio was still in a healthy state, and no further solvency recovery was necessary.
Example 2. User Bob required solvency recovery after portfolio rebalancing.
Stage 1: Before Rebalancing on August 5th, 2024
Before the remediation, Bob’s position within the Minterest protocol was as follows:
- Total Supply: $185,999.74
- Total Borrow: $131,597.01
- Total Collateral: $148,577.11
Bob supplied assets in the markets for WETH, WMNT, and METH, and borrowed assets in the WETH and METH markets. The Health Factor of 1.13 indicated that his collateral was more than enough to cover his borrowings.
Stage 2: After Rebalancing on August 5th, 2024
Following rebalancing to the supply of mETH and WETH assets, Bob’s portfolio experienced some changes:
- Total Value Locked: $28,799.30
- Total Supply: $160,396.31 (reduced Supply on mETH and WETH markets).
- Total Borrow: $131,597.01 (remained the same)
- Total Collateral: $128,094.37 (reduced proportionally to Total Supply).
As a result, the Health Factor slightly decreased to 0.97. Since the Health Factor is below 1 (healthy), the portfolio requires solvency recovery to ensure optimal portfolio health.
Stage 3: After Solvency Recovery on August 5th, 2024
To maintain the integrity and health of Bob’s portfolio, a solvency recovery process was conducted. This process involved using a portion of his Total Supply to reduce his Total Borrow, which successfully recalibrated his position.
- Total Value Locked: $28,799.30
- Total Supply: $103,549.88 (partially used to repay Total Borrow position)
- Total Borrow: $75,865.21 (partially repaid)
- Total Collateral: $82,617.09 (proportional to the new Total Supply, enough to cover the reduced Total Borrow position)
- Liquidation Fee to be Returned: $1,114.64
Post-recovery, the Health Factor improved to a stable 1.09. Additionally, a Liquidation Fee was refunded to Bob, ensuring that his Total Value Locked (in terms of the number of tokens) remained consistent throughout this transition.
Bob’s Total Value Locked of $28,799.30, a net difference between Total Supply and Total Borrow, remained the same in token value between Stages 2 and 3, as a Liquidation fee was returned to Bob.
05, August 2024
