How Does Moonwell Work?

Compound v2 fork with borrow/supply caps and multi-chain deployment on Base, Optimism, Moonbeam

Standard over-collateralized lending model inherited from Compound v2. Users deposit assets as collateral and borrow against them. Supply and borrow caps added as risk management layer.

Kinked utilization curve inherited from Compound v2 with per-market rate parameters

Interest rates follow the standard Compound v2 kinked curve model, with rates jumping sharply above optimal utilization to incentivize repayment and prevent liquidity crises.

Fixed-spread liquidation with Compound v2 close factor and liquidation incentive

Underwater positions are liquidated by external bots receiving a fixed liquidation bonus. The October 2025 crash demonstrated that this mechanism can fail to prevent bad debt during rapid price declines.

Chainlink price feeds for all collateral valuations across Base, Optimism, and Moonbeam

Full dependency on Chainlink oracle feeds for price data. The November 2025 exploit demonstrated that a faulty Chainlink feed (wrstETH/ETH reporting $5.8M per token) can be exploited to drain lending pools.

WELL/MFAM staking safety module for protocol shortfall event backstop

Users stake WELL or MFAM tokens in the Safety Module to backstop against shortfall events (exploits, liquidation failures, oracle malfunctions). Stakers earn WELL rewards in exchange for slashing risk.

WELL token governance with cross-chain execution via Wormhole on Moonbeam, Base, and Optimism

Cross-chain governance execution is relatively novel. Governance proposals can be executed across multiple L2 deployments, introducing bridge dependency risk from Wormhole messaging.

Multi-token emissions (WELL + partner tokens) directed to lending markets

Standard liquidity mining emissions to incentivize deposits and borrowing across markets. Multiple reward tokens distributed simultaneously.

Oracle price feed errors directly enable borrowing against inflated collateral. The November 2025 exploit used a faulty wrstETH/ETH Chainlink feed to borrow 295 ETH ($1M) against worthless collateral, demonstrating the critical dependency.

Flash loans allow attackers to exploit the window between oracle price updates and market reality. Attackers can borrow, manipulate, and profit within a single transaction before the oracle corrects, as demonstrated in the December 2024 $320K exploit.

During rapid market-wide declines, the fixed liquidation incentive becomes insufficient to attract liquidators for smaller positions. Gas wars and network congestion delay liquidations, leading to bad debt accumulation as seen in October 2025.

If the Safety Module is slashed to cover bad debt, the resulting WELL token sell pressure can crash the token price, reducing the effective coverage for future shortfall events in a reflexive doom loop.

Vulnerabilities must be patched across multiple chains simultaneously. A fix on one chain may not be deployed on others in time, leaving attack windows open. Cross-chain governance via Wormhole adds latency to emergency responses.