Monad Co-Founder: Recommends Implementing Dynamic Caps on Collateral Deposits for Lending Protocols to Restrict Hacker Exit Vectors

Keone Hon, co-founder of Monad, stated that if a pooled lending protocol allows an asset to be deposited as collateral, it should impose rate limits on the increase in supply rather than opening up to the maximum supply cap all at once. For example, if the current supply is $100 million and the cap is $300 million, the supply should only be allowed to increase to $110 million within the next 10 minutes. He noted that this approach would limit the scale of possible withdrawals in the event of a hack targeting heterogeneous assets—particularly those exploiting infinite minting vulnerabilities—thereby constraining the impact of such attacks. Keone Hon believes lending protocols are typically the largest exit channel for associated assets. Implementing a “smart cap”—initially set slightly above the current supply and gradually adjusted over several hours to the true cap—would significantly improve risk control and could have prevented today’s ~$200 million loss for rsETH depositors.