Stabledash Live · · 41 min

Project 0's Mac Brennan on the $290M Kelp DAO Exploit and Why DeFi Needs a Prime Broker

With Mac Brennan

Key takeaways

  • Mac Brennan says the Project 0 credit pool, holding about $100 million, had exposure to Drift Protocol when the exploit hit.

  • Project 0 froze its program, marked Drift collateral to zero and, by Brennan's account, unpaused by Friday after a Wednesday exploit.

  • Brennan argues protocols should act against OFAC-sanctioned actors and expects DeFi to eventually become more secure than traditional finance.

Watch the episode

Summary

Founder Mac Brennan explains why Project 0 paused immediately, marked Drift collateral to zero and was back in business two days later.

Mac Brennan, founder of Project 0, says the protocol's credit pool, which holds about $100 million, had exposure to Drift Protocol when the Drift exploit hit. Project 0 aggregates collateral across lending venues so users can borrow against a diversified portfolio at a single rate, with risk managed centrally across the book.

Pause first, then mark to zero

During the Drift exploit, Project 0 paused deposits instantly and coordinated with 20+ protocol partners, Brennan says. The team marked Drift collateral to zero, even though program reserves stand at about 50¢ on the dollar. He says depositors on Kamino were impacted 0%, and that the integration with Jupiter Aggregator's lending market went live right after the incident.

Brennan says the pause protects users who are away from their computer and removes the race to withdraw first and leave risk on those remaining in the pool. He calls any other outcome "completely disrespectful to our users."

“By pausing immediately, we essentially protect people who are away from their computer. There there should be no situation in which, like, you're at a disadvantage in using Project Zero if you decide to go on, like, a vacation away from your device. Like, that's just untenable. That's just, like, completely disrespectful to our users. So this essentially removed the footrace of, like, oh, let me see if I can withdraw first and, like, dump more of the risk exposure on the people remaining in the pool.”
Mac Brennan

Back by Friday

According to Mac Brennan, the exploit happened on Wednesday and Project 0 was back in business Friday. He says Project 0 was Drift Protocol's largest integration among what he counts as north of 15, close to twenty partners, and that it unpaused fastest with the smallest socialization of losses. On a SOL-denominated basis, he says, TVL went up after Friday while the industry saw outflows.

Sanctioned attackers

Brennan says both the Drift and Kelp DAO incidents were traced to DPRK. If funds are confirmed in OFAC-sanctioned hands, he argues, protocols should do what is best for users, as Project 0, Tether and Arbitrum did. He says Circle had three hours of notice and could have done a lot more. Project 0 blocks users coming from sanctioned nations.

Product and security

Brennan says Project 0 has 98% of Solana lending TVL integrated and serves yield farmers alongside traders running rate, carry and basis trades, and that borrowing demand now outpaces lending supply. He says the program is audited by Ottersec, and that the Solana Foundation's STRIDE program with Asymmetric Research and Ottersec will independently audit major Solana programs.

Brennan presents the Drift response as proof of a broader view: with Solana's Rust and Anchor stack and faster coordination between venues, he expects an inflection point where DeFi becomes more secure than traditional finance.

Drift, Circle, Coinbase, and Ottersec come up most.

Ask AI about this conversation

More from Stabledash Live

More conversations like this one

Get the lineup before every live show, plus the newsletter’s short reads.